The US dollar held relatively firm following the dramatic sell-off over the last few days with the DXY index rising 0.2%. Yesterday saw the worst ADP employment reading since 2010 in the US, with the economy only adding 27,000 jobs compared to the 185,000 expected for May. However, the ADP reports does not hold as much market-moving potential as tomorrow’s Nonfarm Payroll release, which remains pivotal for investor expectations regarding Federal Reserve policy. The US dollar strengthened in yesterday’s evening session after the Fed released its latest beige book which highlighted improved economic conditions despite increased tariffs. The beige book report collects anecdotal evidence from businesses across the country and suggests trade policy is yet to have had a significant effect on business sentiment. The dollar has started today in a tight range ahead with little top-tier data in the run-up to tomorrow’s main event.


Sterling looked to have run its course yesterday ultimately trading flat over the course of the session against the US dollar. However, its price action was relatively positive when compared to its G10 compatriots, with only the Kiwi dollar sitting in the green too as the greenback clawed back some losses from earlier in the week. Former Foreign Secretary, Boris Johnson, is gaining momentum this week with a surprisingly professional leadership campaign. Kept on a tight leash by Carrie Symonds and Lee Cain, Johnson is picking up support from the Tory moderates. Journalists are focusing on today’s by-election in pro-leave Peterborough where the Brexit party could gain their first MP. This would likely entrench Johnson’s position to take the UK out of the EU regardless of a deal being reached. With no data on the calendar for the pound today, investors will keep a close eye on broad US dollar trading along with domestic political developments.


EURUSD peaked to the highest point since mid-April yesterday, before falling into a slump late in the US session that eventually made it close below the opening rate. The spread between Italian and German 10-year government bond yields somewhat unexpectedly continued to fall yesterday, after having reached a six month high at the start of the month. Italian yields fell despite the EU releasing a debt report yesterday that kicks off the legal process that leads into disciplinary actions against the Mediterranean country, which was directly met with a defiant response from the Roman government. In our opinion, Italian fiscal debt concerns can definitely make it back to the centre stage of Eurozone stability concerns again coming weeks as the involved parties remain on a collision course, or so it seems. This adds another risk to the threats that face the euro, which may wipe out the recent gains the currency made against USD. Today at 12:45 BST we receive the European Central Bank Monetary Policy Statement, followed by a press conference at 13:30. Details of the Targeted Long Term Refinancing Operations programme are expected, which will mostly serve as a weathervane for how pessimistic the ECB is about medium-term inflation expectations. As the possibilities to normalise policy flow from this, especially the press conference has good potential to jolt the single currency into life.


The loonie fell only 0.07% over the course of yesterday’s trading session, predominantly due to the bout of US dollar strength seen around the release of the Fed’s beige book. In oil markets, WTI crude has entered a traditional bear market after falling over 20% since April’s high. Yesterday saw WTI crude fall $1.18 dollars to close out the session at USD$51.68 per barrel following a build in inventories in the US hammering home investor’s concerns of excess supply in a slowing global economy. The loonie has clawed back minor gains in this morning’s session, with the next top-tier data release tomorrow at 13:30 BST in the shape of employment data for May.