US Dollar at Risk on Soft Data But Risk Aversion May Cap Losses

2016-05-04 04:54:00

Talking Points:

NZ Dollar falls with Asian shares, Yen retreats from 19-month high
Soft ISM, ADP figures may weigh against Fed rate hike speculation
S&P 500 futures hint risk aversion may limit US Dollar weakness

The Japanese Yen and the New Zealand Dollar faced selling pressure in overnight trade. The sentiment-sensitive Kiwi tracked Asian share prices lower, tipping risk aversion as the catalyst behind the move. The Australian Dollar managed to hold up better than its New Zealand counterpart, trading little-changed as corrective flows after yesterday’s sharp post-RBA selloff helped offset risk-off pressure.

Meanwhile, the Yen’s losses appeared to reflect a retracement after the currency hit a 19-month high yesterday. The typically anti-risk currency may have managed to diverge from sentiment trends with Japanese markets closed for a holiday.

Looking ahead, a relatively quiet economic calendar in European trading hours is likely to see investors looking ahead to US news-flow. An estimate of payrolls growth from ADP and April’s ISM Non-manufacturing Composite gauge take top billing.

The former is expected to show the economy added 195,000 private sector jobs in April, marking a bit of a slowdown from the 200k gain recorded in the prior month. The latter is projected to reveal that the pace of service-sector activity growth accelerated to the fastest in four months.

US data outcomes have increasingly underperformed relative to consensus forecasts in recent months, opening the door for disappointments. Such outcomes may inform pre-positioning ahead of Friday’s much-anticipated release of official employment figures, weighing on the US Dollar as traders bet that soft data will scatter chances for a Fed rate hike next month.

Continued risk aversion may offer a lifeline to the greenback however. The benchmark unit reclaimed its safe-haven credentials yesterday, pushing broadly higher against the majors as stocks declined. S&P 500 futures are pointing meaningfully lower overnight, warning that more of the same may cap data-inspired USD weakness.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Unemployment Rate (1Q)	5.7%	5.5%	5.4%
22:45	NZD	Employment Change (QoQ) (1Q)	1.2%	0.6%	1.0%
22:45	NZD	Employment Change (YoY) (1Q)	2.0%	1.3%	1.4%
22:45	NZD	Participation Rate (1Q)	69.0%	68.6%	68.5%
22:45	NZD	Pvt Wages Ex Overtime (QoQ) (1Q)	0.4%	0.3%	0.4%
22:45	NZD	Pvt Wages Inc Overtime (QoQ) (1Q)	0.4%	0.3%	0.4%
22:45	NZD	Average Hourly Earnings (QoQ) (1Q)	0.3%	0.5%	0.2%
23:00	USD	Fed's Lockhart Speaks to World Affairs Council	-	-	-
23:01	GBP	BRC Shop Price Index (YoY) (APR)	-1.7%	-1.7%	-1.7%
23:30	AUD	AiG Perf of Services Index (APR)	49.7	-	49.5
0:00	NZD	QV House Prices (YoY) (APR)	12.0%	-	11.4%
1:00	NZD	ANZ Commodity Price (APR)	-0.8%	-	-1.3%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:00	CHF	UBS Real Estate Bubble Index (1Q)	-	1.41	Low
6:45	EUR	France Trade Balance (MAR)	-4200m	-5177m	Low
6:45	EUR	France Current Account Balance (MAR)	-	-3.9b	Low
7:45	EUR	Markit/ADACI Italy Services PMI (APR)	51.9	51.2	Low
7:45	EUR	Markit/ADACI Italy Composite PMI (APR)	-	52.4	Low
7:50	EUR	Markit France Services PMI (APR F)	50.8	50.8	Low
7:50	EUR	Markit France Composite PMI (APR F)	50.5	50.5	Low
7:55	EUR	Markit Germany Services PMI (APR F)	54.6	54.6	Medium
7:55	EUR	Markit/BME Germany Composite PMI (APR F)	53.8	53.8	Medium
8:00	EUR	Markit Eurozone Services PMI (APR F)	53.2	53.2	Medium
8:00	EUR	Markit Eurozone Composite PMI (APR F)	53.0	53.0	Medium
8:30	GBP	Markit/CIPS UK Construction PMI (APR)	54.0	54.2	Medium
9:00	EUR	Eurozone Retail Sales (MoM) (MAR)	-0.1%	0.2%	Medium
9:00	EUR	Eurozone Retail Sales (YoY) (MAR)	2.6%	2.4%	Medium
10:15	EUR	ECB's Weidmann Speaks in Frankfurt	-	-	Medium