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

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

Ilya Spivak, Head Strategist, APAC

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.

Are markets matching DailyFX analysts’ 2Q forecasts? Find out here !

Asia Session

22:45NZDUnemployment Rate (1Q)5.7%5.5%5.4%
22:45NZDEmployment Change (QoQ) (1Q)1.2%0.6%1.0%
22:45NZDEmployment Change (YoY) (1Q)2.0%1.3%1.4%
22:45NZDParticipation Rate (1Q)69.0%68.6%68.5%
22:45NZDPvt Wages Ex Overtime (QoQ) (1Q)0.4%0.3%0.4%
22:45NZDPvt Wages Inc Overtime (QoQ) (1Q)0.4%0.3%0.4%
22:45NZDAverage Hourly Earnings (QoQ) (1Q)0.3%0.5%0.2%
23:00USDFed's Lockhart Speaks to World Affairs Council ---
23:01GBPBRC Shop Price Index (YoY) (APR)-1.7%-1.7%-1.7%
23:30AUDAiG Perf of Services Index (APR)49.7-49.5
0:00NZDQV House Prices (YoY) (APR)12.0%-11.4%
1:00NZDANZ Commodity Price (APR)-0.8%--1.3%

European Session

6:00CHFUBS Real Estate Bubble Index (1Q)-1.41Low
6:45EURFrance Trade Balance (MAR)-4200m-5177mLow
6:45EURFrance Current Account Balance (MAR)--3.9bLow
7:45EURMarkit/ADACI Italy Services PMI (APR)51.951.2Low
7:45EURMarkit/ADACI Italy Composite PMI (APR)-52.4Low
7:50EURMarkit France Services PMI (APR F)50.850.8Low
7:50EURMarkit France Composite PMI (APR F)50.550.5Low
7:55EURMarkit Germany Services PMI (APR F)54.654.6Medium
7:55EURMarkit/BME Germany Composite PMI (APR F)53.853.8Medium
8:00EURMarkit Eurozone Services PMI (APR F)53.253.2Medium
8:00EURMarkit Eurozone Composite PMI (APR F)53.053.0Medium
8:30GBPMarkit/CIPS UK Construction PMI (APR)54.054.2Medium
9:00EUREurozone Retail Sales (MoM) (MAR)-0.1%0.2%Medium
9:00EUREurozone Retail Sales (YoY) (MAR)2.6%2.4%Medium
10:15EURECB's Weidmann Speaks in Frankfurt --Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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