Forex Daily Wrap: Aussie Strengthens In Wake Of Employment Report

Overnight, AUD strengthened the most in 3-weeks in the wake of a stellar Australian employment report, which prompted participants to pare May RBA rate cut calls. Unemployment rate fell to a 3-month low as the participation rate rose to an 8-month high, with the headline reading more than double expectations (37.7k vs. Exp. 15.0k (Prev. 15.6k, Rev. 42.0k). Elsewhere, the USD-index extended on yesterday’s 0.7% losses amid heavy fund selling, consequently lifting major USD-pairs across the board during Asian trade.

During the European morning, the USD-index retraced some of yesterdays’ US Empire & Industrial Production inspired losses which weighed on the EUR, with EUR/GBP breaking back below the low printed yesterday at 0.7167. GBP/USD traded steady with attention turning to tonight’s UK Election debate which will be close watched as the market looks to observe any impact on the latest election polls.

However, heading into the North American crossover USD pared its entire earlier gains, with this week's disappointing data releases leading some participants to take June off the table for Fed rate lift-off. Misery continued for the greenback as further tier-1 releases out of the US echoed downbeat data from earlier this week, with US Housing Starts (926K vs. Exp. 1040K ) and Building Permits (1039K vs. Exp. 1081K) both missing estimates and US Initial Jobless Claims (294K vs. Exp. 280K) showing a larger than expected rise. The weakness in the USD offset losses in the EUR from heightened concerns over Greece, with yesterday’s downgrade from S&P being followed by comments from German Finance Minister Schaeuble, who downplayed expectations for a breakthrough in Greek/Eurogroup negotiations by saying ‘nobody expects that there will be a solution.

Looking ahead, key data releases tomorrow include UK jobs report, eurozone, US, and Canadian CPI, as well as Canadian Retail Sales, US University of Michigan Sentiment and Leading Index. Finally, ECB’s Weidman will be holding a press briefing alongside German Finance Minister Schaeuble, which could reveal more on the ongoing situation in Greece.