>>Major news out of China and Turkey
The two major news-makers over the weekend were China’s near-record trade surplus and Turkey’s governing Justice and Development Party (AKP) losing its parliamentary majority for the first time in 13 years. China’s massive trade surplus, 59.49 billion USD worth, is believed to be a result of a weakening of domestic demand, shown in the very weak import numbers. In Turkey, the loss of the status quo and uncertainty regarding the future during a coalition or minority government caused the lira to fall almost 4% percent against the USD.
>>USD: What happened and what will happen
Non-Farm Payrolls are the most important economic indicator in this environment. The NFP numbers are two-fold in reality: jobs added and unemployment rate. For the first portion, the numbers were phenomenal: 280K jobs added versus a 25K consensus. The unemployment rate, however, ticked up a tenth of a percent from 5.4% to 5.5%. Somehow we added jobs while unemployment rose. Traders will look to Retail sales numbers on Thursday for the next market-mover. Last month, there was 0% growth.
>>EUR: Greece, you better shape up
The Euro has been strengthening against the USD for the past couple of weeks until that trend was interrupted by the US non-farm payroll numbers. As of this morning, the Euro has resumed its upward climb, as traders view the non-farm payrolls numbers Friday as both good and bad, while more and more analysts are becoming comfortable with a Greek default and exit from the Eurozone. The more the Grexit becomes seemingly inevitable, the worse the adverse effects will be on the euro. The underlying data from the economy of Europe has been surprisingly good, which has led many to believe the ECB’s loose monetary policy might be stopped before the previously-believed end of 2016. Keep an eye on the Eurozone GDP numbers for Q1 that will be released Tuesday. If they are very strong the Euro will likely weaken as traders believe very strong GDP numbers will all but make certain an abbreviated QE.
>>GBP: Mirroring euro for now
The only real currency-affecting news from Great Britain was the elections a couple weeks ago, and the digestion of how that will impact monetary policy going forward. Less any movement arising out of monetary policy, the GBP has all-but mirrored the Euro against the USD.
>>CAD: No longer mirroring oil
The Canadian dollar stayed busy last week moving its trading levels against USD between 1.256 and 1.2370 amid economic news in the region and next door. The loonie depreciated 0.5% against the US dollar after stronger than expected ISM Manufacturing numbers on Tuesday. Solid Nonfarm Payroll figures on Friday further fuelled the dollar’s pressure on USDCAD. However, the pair moved lower after Net Change in Employment increased by 58.9K vs 10K expected, and both Housing Starts (201.7K) and Building Permits (11.6%) reported figures that surpassed May estimates. Good performance on core economic indicators, rather than oil, is driving CAD appreciation against other currencies. This week no major indicators will be released from Canada, so pressure on the loonie will come from abroad.
>>AUD: Data-dependent is “In”
The Aussie dollar spiked early last week as the Reserve Bank of Australia kept interest rates unchanged at 2%. The AUD/USD rallied on RBA’s Governor Glenn Stevens decision to leave rates untouched for another session, but fell after a big miss in Trade Balance figures and strong US Nonfarm payroll numbers. Australia releases key employment figures on Thursday that are likely to impact the currency if they come short of expectations. RBA’s Governor stated future economic guidance will be more data dependent.