USD

The USD is trading a bit higher this morning as some profit-taking in other currencies has given the greenback a bit of a boost. Having been under pressure the last week, traders are looking at positive reopenings of state economies across the nation as well as some positive economic data released yesterday. ISM Non-Manufacturing PMI beat expectations coming in at 37.0 for Composite PMI and 37.5 for Services PMI. Both numbers were much better than the previous month. ADP private sector jobs report showed a loss of only 2.76 million jobs in May, much better than expected as well. The focus will now be on the Department of Labor’s initial jobless claims for the week ended May 30th. Another 1.88 million people filed for unemployment last week. There have already been over 41 million jobless claims filed since the viral pandemic began, but the number has been declining as businesses reopen and people return to work. Traders will now immediately focus on tomorrow’s release of Non-Farm Payroll for May and the unemployment rate. NFP is expected to show a loss of around 8 million jobs in May after losing 20.5 million jobs in April. The unemployment rate is set to rise to 19.0% from last month’s 14.7%. As always traders react to these numbers based on “perception vs. reality”, meaning how close the numbers are to what was expected. US Treasury yields are also lower with the 10-year note trading at 0.7508% and the 30-year bond trading at 1.5407%.

EUR

EUR/USD is trading off its overnight highs as some profit-taking has been seen. Technically, the single currency has moved below the 70-level on hourly RSI charts, while the currency pair remains above the 50, 100, and 200-day moving averages. The highlight this morning will be the European Central Bank’s (ECB) monetary policy decision and the press conference by ECB President Christine Lagarde. At their monetary policy meeting held this morning, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25%, and -0.50%, respectively, as expected. But, more importantly, the ECB announced that it expanded its Pandemic Emergency Purchase Program (PEPP) by €600 billion to €1,350 billion. The statement from the central bank will be extended to at least June 2021. The Governing Council also announced that they will conduct net purchases under the PEPP until such time that the Council judges that the coronavirus crisis phase is over. EUR/USD has reacted by moving to highs not seen since mid-March.

GBP

GBP/USD is also trading off recent highs as no-deal Brexit concerns are high as talks between the EU and UK seem to be deadlocked. Technically, the currency pair failed to break major resistance levels. The GBP is currently trading above the 100 and 200-day moving averages, however, the 20-day has crossed the 50-day on the downside indicating a possible further fall in the pound. RSI is now below 70, eliminating any overbought conditions. The Bank of England is sending a message to commercial banks to get ready for a no-deal Brexit. As there has been no progress from the current round of negotiations, which are due to end tomorrow, it looks as if the UK will be trading under World Trade Organization rules and that possibility is putting pressure on the pound. Viral cases are falling, but at a relatively slow pace compared to the rest of Europe. Markit Construction PMI was released yesterday and rose from 8.2 to 28.9, but still well below 50, indicating a deep contraction in the British housing sector. 

JPY

USD/JPY is higher this morning as traders remain in risk-on mood and exiting safe-haven trades. Technically, the USD/JPY is trading above all the daily moving averages and the RSI level for USD/JPY remains above the “overbought” level of 70. Failure to break through overnight resistance level has seen the USD/JPY fall off its overnight trading highs, but it seems as though traders are just waiting for fresh catalysts to continue their move higher. Much better than expected US jobless claims numbers as well as any positive EUR surprises from the ECB meeting could be that catalyst. There were no significant economic releases overnight in Japan and the currency is now at the whim of the traders. Expect to see another run at the resistance levels during trading today.

CAD

USD/CAD had a quiet trading session overnight after the Bank of Canada left its interest rates unchanged, eased up on market operations and has apparently ruled out the prospect of negative interest rates for the time being. The actual statement from the central bank was optimistic as policymakers believe that the coronavirus economic impact “appears to have peaked.” The statement went on to say that the BOC will be reducing the frequency of its term repo operations to once per week, and its program to purchase bankers' acceptances to bi-week operations. Canadian trade numbers are expected out this morning and the trade deficit is expected to grow to C$2.36 billion from the previous report of C$-1.41 billion. Oil prices were slightly lower this morning with Brent crude futures falling $0.29 to $39.50 per barrel, while US West Texas Intermediate crude futures fell $0.53 to $36.76 per barrel. There are concerns among traders that oil producers will be unable to agree on output cuts during today’s OPEC+ meeting. 

CNY

According to a report in the New York Times, Hong Kong has made it a crime to “mock” the Chinese National Anthem. There is a report that activists intend to commemorate the 1989 Tiananmen crackdown despite the ban. The remembrance of Tiananmen square has been an annual event in Hong Kong as the city has had far greater civil liberties than mainland China. The new national security laws that China passed last week regarding Hong Kong will certainly come into play if the event occurs. Hong Kong city police have stated that holding the annual vigil would risk the spread of the coronavirus, as public gatherings of more than eight people have been in effect and were extended this week. It will be interesting to see what happens.