The U.S. Dollar retreated against most currencies across the board as markets welcomed news of dovish central banks ready to provide stimulus and the nomination of Christine Lagarde as European Central Bank President once Mario Draghi departs at the end of the year.
Ms. Lagarde, a highly respected financial authority of French nationality, is predicted to be pro-stimulus and willing to protect the Euro-bloc. In addition to the friendly tone in recent days regarding China-U.S. negotiations, commodity-based currencies are finding reprieve as their economic outlooks look less dire.
ADP Employment this morning showed that June failed to meet expectations. The figures released 102K new private payrolls instead of the estimated 140K, marks two months of much lower readings than predicted. While currencies recover, the hope is that other aspects of the global economy improve as well. Domestically, we shall see if Factory Orders and Durable Goods Orders overcome previous contractions.
What to Watch Today…
- PMI Services 9:45AM
- Factory Orders 10AM
Complete Economic Calendar can be found here.
The Euro is stuck in current ranges ahead of the July 4th holiday. Being pulled in both directions by different factors such as doubts over long-term business investment and the prospects of a stimulus package coming up from the ECB down the line, the shared currency is being held from surging. Christine Lagarde could prove dovish for Euro-growth hopes.
The French nominee would be the first woman to hold the position, coming in with a strong resume as head of the International Monetary Fund (IMF) since 2011. Her experience in dealing with the recovery out of the Great Recession is seen as evidence that she will follow in Mario Draghi’s footsteps. We shall see where all these heads, but the Euro-zone needs to climb out of its stagnant state and clearly the European authorities want a continuation of monetary policy to accommodate the environment.
The Japanese Yen is rising after a tough end to June based on the Bank of Japan making some adjustments to its bond-buying program, the quantitative easing they have maintained for some time. Essentially, they lowered their purchases of certain sovereign bond instruments such as 10-25 year debt and increased the shorter-term 1-3 year securities.
The goal is to steepen the yield curve, which was flat and indicative of no future return on investment, while now there is some incentive to buy Japanese debt long-term. Maintaining a helpful financial environment has been the goal of the BOJ thus this change makes some feel they are ready to consider tightening measures in the future, a plus for Yen.