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USD
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The U.S. dollar continued its bullish sentiment overnight, pushing higher against the majority of its counterparts ahead of a heavy economic docket slated for release in the United States. The greenback gained support after the euro-area unemployment surged to a record and as Chinese manufacturing grew less than forecast last month, boosting demand for the safe-haven currency. The European Stoxx 600 fell over 1.0% and U.S. equities show American shares will open lower, adding to the general risk-off sentiment. This morning’s economic data disappointed expectations sending stock futures even lower. American employers in May added the smallest number of workers in a year and the unemployment rate unexpectedly increased, further evidence the labor market is struggling. Payrolls climbed by 69K last month, less than the 150K estimated by economists. April’s payrolls were also revised downward to 77K from 115K. The jobless rate registered at 8.2% from 8.1%. In addition, personal income rose only 0.2%, down from a 0.4% estimate. Also personal spending, which accounts for 70.0% of the economy grew a meager 0.3%, in line with expectations. Later this morning, the ISM manufacturing print is expected to register at 54.8. The U.S. dollar has seen muted reaction to the data in early trading but may find additional gains throughout our session as stock futures fall and the yield on the 10-year U.S. treasury has fallen to a record low below 1.5%. |
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EUR
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The euro depreciated to fresh lows overnight after unemployment reached a record high of 11.0% in the euro zone. European stocks fell for a third consecutive day, with the Stoxx Europe 600 Index falling 1.5%, down a combined 6.8% in May as the debt crisis continues to pose serious challenges for EU growth. Chinese manufacturing growth fell this morning to the slowest pace this year, driving commodities even lower as the woes in Europe are having major global implications. In Greece, early opinion polls show conflicting reports of which party is leading, signaling a tight race is in store for the mid-June elections. Spanish Prime Minister Mariano Rajoy hinted that Spain’s debt sustainability might be in danger. Economy Minister Luis de Guindos reported Spain has a net of only 66B euros of capital left in March, which will prove troublesome because the ECB has refused Spain’s pleas for capital injections. |
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GBP
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The British pound fell overnight; approaching 14-month lows versus the U.S. dollar. U.K. manufacturing shrank last month at the fastest pace since the middle of the financial crisis in 2009 as the bottom fell out of demand. The PMI figure came in at 45.9, lower than the 49.7 estimate, and below the contraction/expansion 50.0 line. The disappointing manufacturing print raises the probability of a Bank of England quantitative easing push next month, as disappearing domestic demand and euro zone risk exposure are weighing down the British economy. |
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JPY
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The Japanese yen pushed modestly higher versus the greenback but reached an 11-year high versus the higher-yielding Euro as investors fled to the perceived safety of the yen. Japan’s Finance Minster Jun Azumi pledged to take “decisive” action if excessive gains in the currency persist. His comments may fuel speculation officials are preparing to intervene in the markets. The last time the Japan intervened in the currency market to stem the currency’s gains was on November 4th. |