Dollar regains some ground as markets turn their focus to employment data from US today. Non-farm payroll is expected to show 170k growth in May with unemployment rate unchanged at 5.0%. Wage growth is expected to maintain momentum with average hourly earnings risen 0.2% mom. Other employment data weren't spectacular during the month. ADP private sector job growth rose 7k to 173k in May. But employment component of ISM manufacturing was unchanged at 49.2 but stayed below 50 for the sixth straight month. The four week moving average of initial jobless claims rose from 258k to 277k. Also, Conference Board consumer confidence dropped to 92.6, the lowest level in 2016. The set of data points to a mildly underwhelming NFP report today.
The continuous chorus of hawkish Fedspeaks suggest that Fed will either hike rate in June or July. The importance of today's employment data might be lessened by renewed worry over Brexit and the impact on financial markets. Nonetheless, NFP would still likely be the most market moving one in recent times. As of yesterday, fed fund futures are pricing in 21% chance of June hike and 58% chance of July hike. Dallas Fed president Robert Kaplan said that the economy is "pretty darn close" to full employment and inflation is starting to pick up. And, there is "a cost to having rate this low" and "a natural inclination to take more risks".
The dollar index struggled to extend gain and retreated after hitting the medium term falling channel. Nonetheless, downside is so far held above 94.93 support so far. And thus, near term outlook stays bullish. We're favoring the case that fall from 100.51, which is the third leg of the consolidation pattern from 100.39, has completed at 91.91 after hitting long term fibonacci level at 92.18. Sustained trading above the channel resistance should add more credence to this case and pave the way for a retest on 100.39/51 resistance zone. Though, break of 94.93 will dampen this bullish case and turn focus back to 91.91 low.
Euro is overall mixed after ECB left monetary policies unchanged yesterday. The main refinancing rate is held at 0.00% while the deposit rate is kept at -0.4%. Marginal lending facility rate is unchanged at 0.25%. The EUR 1.8T asset purchase program was also left unchanged. ECB president Mario Draghi noted that "the risks to the euro area growth outlook remain tilted to the downside, but the balance of risks has improved on the back of the monetary policy measures taken and the stimulus still in the pipeline." And, he expected "economic recovery to proceed at a moderate but steady pace." But growth would be dampened by subdued growth prospects in emerging markets, the necessary balance sheet adjustments in a number of sectors and a sluggish pace of implementation of structural reforms." Meanwhile, Draghi also noted that the central bank is ready for 'all contingencies' regarding the EU referendum in UK on June 23. ECB raised 2016 GDP projection to 1.6%, up from 1.4%. For 2017, growth is projected to be 1.7%, unchanged. But 2018 growth forecast was revised lower to 1.7%, from 1.8%. 2016 inflation forecast was also raised to 0.2%.
On the data front, services PMI will be a main focus today in addition to NFP. Eurozone and UK will release services PMI. Eurozone will also release retail sales. Canada will release labor productivity and trade balance. US will release NFP, trade balance, factory orders and ISM non-manufacturing.