• Greek and Euro meeting tonight
  • Europe and UK see disappointing service numbers
  • US lookings to today’s ADP jobs and Friday’s payroll
  • AUD surprised by strong GDP growth

Euro was led higher yesterday with EURUSD notching up one of its best days in the past five years. The reasons were threefold; a Greece deal seems closer than ever, inflation is running higher than expected and a little bit of deck clearing ahead of the ECB meeting and press conference this morning.

Greek Prime Minister Tsipras is meeting with European Commission President Jean-Claude Juncker in Brussels tonight with the former looking to present Greece’s thoughts on pension, tax and budget reforms to its creditors. A deal will not be done this week but there must be a view to have some kind of agreement signed and dotted at the next meeting of the Eurogroup on June 18th.

As for the euro, we have to believe that a base of expectation has now been put in and the single currency will remain supported by that. It would likely take another Syriza/Varoufakis/Tsipras created nightmare to bring EURUSD back below 1.08. Updated staff forecasts should continue to show us that the ECB believes that it will hit its inflation targets as long as QE is maintained.

Service reports through Europe and the UK have been disappointing this morning. The services sector is where additional disposable income should be being spent and the low levels of inflation should be supporting consumption. These releases do start to show inflation pressure coming back into the sector. Of course, we are nowhere near where central banks would prefer.

Those looking for some forewarning to Friday’s payrolls announcements should pay attention to the ADP jobs release today. Markets are looking for 200,000 jobs to be added in May and the hope is that, alongside tonight’s Beige Book survey of regional Federal Reserves, the narrative of a rebound from a poor Q1 is continued.

june-3 graph

I am looking for a payrolls number above 250,000 on Friday and the dollar to progress higher into the weekend.

AUD has continued its run higher this morning after a strong GDP announcement of 0.9% vs 0.7% expected. This follows yesterday’s neutral language from the Reserve Bank of Australia.

EURUSD has leapt higher in the past 24hrs but we can expect pressure to remain on the single currency from the European Central Bank and a resurgent US jobs market. I would be looking for the pair to retrace lower later in the week

GBPUSD is still towards the lows of its 1.52 to 1.57 range and pressures will remain on the pound through the rest of the week.

AUDUSD is one of the few pairs to be flat on the session following that strong GDP announcement overnight. Aussie has weathered some storms this week and I need to reassess the scale of our negative expectations for the currency and the economy.

USDCAD is higher as oil prices move lower as the OPEC meeting begins in Vienna. Oversupply looks set to continue and with low demand that points to lower prices in the short term.

Have a great day.