June 11 2016

June 10, 2016 (Tempus Inc.) – While the U.S. dollar was able to claw back some of its recent losses versus its European counterparts overnight, the greenback fell to fresh lows against the Japanese yen and the New Zealand dollar.  The yen rose to its strongest level in more than a month as European equities fell, boosting demand for the safe-haven.

Despite the modest rebound during the overnight session, the greenback continues to be under pressure following Friday’s poor jobs report.  Speaking on Monday, Janet Yellen did not do the dollar any favors by refraining from signaling the timing for higher rates after saying on May 27 an increase would likely be appropriate in “coming months.”

As a result, Fed funds futures indicate 58% odds that the Fed will raise rates by year-end, down from 74% probability from a week ago.  The odds of a July rate hike are now just 18%, down from 55% last Thursday.

This morning’s light economic docket showed that first-time jobless claims unexpectedly fell last week and continuing claims tumbled to an almost 16-year low, showing decent signs for the labor market.  There are also no Fed speakers today or next week ahead of the Fed’s interest rate decision next Wednesday.

The New Zealand dollar was the best performing currency overnight, rallying as much as 1.5% against the U.S. dollar before shedding some of those gains.  Nevertheless, the kiwi is now trading at a one-year high against the U.S. dollar.  The Kiwi’s strength comes after the Reserve Bank of New Zealand kept its key interest rate unchanged.
RBNZ Governor Graeme Wheeler said he expected inflation to reach the midpoint of is 1-3% band earlier than previously projected, causing traders to push back expectation of further monetary easing.

After gaining steadily against the U.S. dollar since last Friday’s U.S. jobs data, the Euro retreated overnight.  EUR/USD may have found the top of the range as the common currency has been able to hold above key technical levels during the last two trading sessions.
There economic docket was unable to affect the direction of the Euro.  However, European Central Bank President Mario Draghi will speak at an Economic Forum in Brussels today and the market is likely to react to his comments.