Daily Currency Update

USD - US Dollar

Consensus estimates suggest that US Non-Farm Payrolls will experience a solid increase of 230,000 in June, contributing to a low unemployment rate of 3.6%, lower than May. Market expectations have been boosted by the strong ADP data, leading to speculation of an upside surprise in the actual data. However, it is worth noting that the "whisper" number (market-driven estimates) provided by Bloomberg surged to 275,000 after yesterday's report. This might mean that the USD's response to better-than-consensus data could be limited. Additionally, there is a possibility that the ADP data overstates the strength of the labor market compared to the official data, potentially due to seasonal effects, particularly with the surge in hospitality and services. Consequently, the USD is approaching the data cautiously. Despite gaining ground following the ADP report yesterday, the USD experienced a broad decline and closed lower for the day. Overnight, the USD's performance has maintained a defensive tone. Considering the current dynamics, there is a chance that the USD might end up lower following the release of the US jobs data, unless there is a significant deviation from expectations on the positive side.

CAD - Canadian Dollar

The Canadian dollar (CAD) has maintained a weakened stance following its drop below the 1.33 level yesterday. In June, Canadian jobs data is anticipated to rebound after a weaker report in May. Analysts are expecting a gain of 20,000 jobs. While wage growth is projected to slow down to 4.6%, it is still at levels that present a significant obstacle for the Bank of Canada (BoC) to achieve its inflation target. Furthermore, the data on hours worked will provide further insight into the evolving growth trends for the second quarter, which appear to be surpassing the BoC's expectations. If the data shows strength, it should strengthen the case for another rate hike from the BoC, although it might not occur as soon as next week. This positive data would likely give a boost to the CAD. Observe the USD/CAD trends.

EUR - Euro

Yesterday, the euro (EUR) experienced a decline, falling back to the low 1.08 range, triggered by the release of US ADP data. However, there has been consistent support whenever the EUR dips, leading to a recovery back to the upper 1.08 range. Following the release of the data yesterday, there was a brief period where the 2-year spread moved unfavorably for the EUR. Nevertheless, short-term interest rate differentials have shown little change compared to the levels before the release of the ADP data. Earlier, ECB Governor Guindos mentioned that underlying price pressures remain strong, but there is some softening in core inflation. He indicated that a September rate hike is still uncertain. Furthermore, President Lagarde reiterated that the ECB recognizes the need to take action to address inflationary pressures.

GBP - British Pound

The British pound (Sterling) has shown minimal movement during the session. Similar to the euro (EUR), the GBP has rebounded comfortably against the USD after a dip following the release of the ADP data. It has traded back to the mid-1.27 range. Since there are no significant data reports from the UK at the moment, the GBP's recovery is primarily supported by positioning and its short-term yield advantage over the USD.