Good morning. Twenty fours ago, it appeared that Greek Prime Minister Tsipras had finally capitulated with a conciliatory letter to EU creditors asking for a new bailout that would accept many of their terms. North American equities took the baton from Europe and finished the day a sea of green, optimistic a deal was imminent. But by the end of the North American session, Mr. Tsipras had returned to his combative tone in a television address to the Greek people. Mr. Tsipras once again explained that Greece was being “blackmailed†and urged his constituents to take pause before this weekend’s referendum. The EURUSD rate, trading nearly 200 pts below this week’s high, remains in limbo now before the US jobs report kicks off a long holiday weekend.
Overnight, data was scarce as the results of Australia’s trade deficit highlighted the Asia session. It was reported the Australia’s deficit was reduced in May to $2.75 billion as April’s initial deficit of $3.9
billion actually ballooned to $4.15 billion. The Australian dollar eased as a result, falling further versus the stronger greenback especially. Chinese stocks continued their slide, ignoring any moves by policy makers in China to restore confidence. Shanghai’s benchmark index crashed 4,000 points for the first time since April and Chinese markets have now lost more than 20% in value since June 12th. In Europe, it was rather quiet but the Riksbank policy decision did garner a bit of attention as the central bank eased an additional 10 bps and extended their QE program from September to year end. This adds further spotlight to the fact the US may in fact be the only country on planet Earth considering raising interest rates. Take into contrast the situations in Europe and mainland China, and it is a wonder the dollar is not trading even higher. As is the case on NFP, the markets have grinded into very tight ranges with EURUSD keeping a 40 pip range for the last twelve hours. Expect a lot of trade desks in the US to be empty by 12pm today as participants get out of dodge for the long holiday weekend.
Turning toward North America, this morning we will get a look at the US non-farm payrolls for the month of June. After ADP reported yesterday that American private employers hired the most workers in June in six months – 237,000 – Wall Street is expecting a similar number today, with 232,000 new roles anticipated. The NFP report will be released at 830am EST. The recent push of upbeat data supports views of a September rate hike from the Federal Reserve. Furthermore, on Wednesday it was reported that US construction spending rose in May by 0.8% after a 2.1% rise in April. The dollar has found a bid tone in the latter part of the week as it appears Greek negotiators could be caving to demands from their European creditors. If this uncertainty is removed from the market, this clarity, combined with the wave of positive data could pave the way for rate hikes in the US as the American economy has emerged from its first quarter dip.
Canadian markets re-open today following yesterday’s Canada Day holiday. The USDCAD rate has moved higher, approaching rates not seen since early June. Commodity prices have been very erratic this week and despite a spike in barrel prices on Tuesday, the Loonie has remained “offered†and some see it continuing to move lowers versus the greenback over the coming months. Tuesday’sdisappointing GDP print adds to the growing fear that Canada’s central bank could in fact cut rates fearing recession. This morning, RBC Manufacturing PMI is released at 930am, the market is hoping for a move above the key 50 level after last month’s 49.8 print. For now, the Canadian dollar remains a sell on rallies.
Further reading:
EUR: Trading Greek Outcomes – BNPP
GBP/USD: Trading the British Services PMI
