I will start with the demise of the AUD overnight as retail sales data came in at a 14 month low at -0.5% for May versus an expected flat reading, which followed disappointing trade data on Wednesday.
The RBA’s Governor, Glen Steven,s was on the wires from Hobart in his usual bearish mood as he suggested that the market is under-estimating the likelihood of a significant fall in the AUD at some point.
He sighted high production costs in Australia and said the RBA still have ammunition with regards to monetary policy tools. He also reiterated, “Let me be clear, again, that the exchange rate remains high by historical standards”.
A unique day as the US jobs report and the ECB press conference statement from super Mario will be released in tandem due to the 4th of July holiday in the US tomorrow.
The ADP print yesterday came in above consensus at 281k (consensus 215k), which – following on from the solid initial claims data and employment components of the service sector surveys – all point to a stronger US jobs report today as the consensus expects a NFP reading of 215k and the unemployment rate to hold steady at 6.3%.
The ECB announced substantial adjustments to monetary policy last month so today will be all about ECB President, Mario Draghi’s, press conference and clarity on the measures taken.
Of particular interest will be the eligibility for the longer-term refinancing operations (LTRO) with the questions and answers session likely to focus on how the euro has barely moved since the announcement four weeks ago and, more importantly, how Draghi will answer the question on lending following the largest monthly fall since 2013. (To recap, lending to credit institutions has declined by €111bn in the past four weeks.)
There is also some speculation that the ECB will announce it will cut back on the number of press conferences it holds from monthly to quarterly to coincide with the release of staff projections.
Services PMI data from the EU and the UK will be released from the EU and the UK this morning along with retail sales data from the EU.
Supports 1.3625-1.3575-1.3505 | Resistance 1.3680-1.3700-1.3740
Supports 101.70-101.25-100.75 | Resistance 102.15-102.50-102.85
Supports 1.7130-1.7100-1.7060 | Resistance 1.7185-1.7200-1.7285
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