US and Canada Report on Jobs as G7 Fin Mins Talk Taxes

Today’s Highlights

• •    The dollar remains mostly firmer after yesterday’s strong bounce.  A robust jobs report is expected and there is scope for upward revisions to the inexplicable weakness in the previous report. 
• •    The initial move in the fx and rates market was not sustained after the disappointing April report. 
• •    A loss of Canadian jobs for a second month may see the Bank of Canada’s rhetoric soften a little at next week’s meeting.  
• •    The G7 finance ministers meet to coordinate the position on tax reform as part of the G20/OECD initiative.
• •    The decision to shift out of dollars by a Russian sovereign wealth fund seems mostly symbolic ahead of Biden/Putin meeting on June 16 and the risk of new sanctions.
• •    Mexico holds local and legislative election this weekend and AMLO and his coalition is widely expected to maintain a large majority in Congress. 

Stronger than expected US employment data, ahead of today’s monthly report and compromise proposal on corporate tax by the White House to help secure a deal on infrastructure sent US bond yields and the dollar high.

Late dollar shorts were forced to cover. The greenback is mixed now, with the yen, sterling, and Antipodeans slightly firmer. The Norwegian krone, Canadian dollar, and euro are still heavy. The dollar is rising against most emerging market currencies, though, of note, the Turkish lira is stabilizing after losing about 1.25% yesterday, its largest loss in four weeks. The JP Morgan Emerging Market Currency Index is slipping for the second consecutive session and is practically flat on the week.

China, Australia, and New Zealand equities rose ahead of the weekend, but most other markets in the Asia Pacific region fell, while  Tokyo was mixed. European bourses are mixed, with the Dow Jones Stoxx 600 hovering around the record high set on Tuesday. US futures are little changed, and the 10-year Treasury yield is around 1.63%, about a three basis point increase on the week. The two-year yield is poking above 16 bp for the first time in three weeks. European bonds are quiet.

Note that rating decisions are expected today from Moody’s for Russia and Turkey, while Fitch assesses Italy and DBRS, Germany. Gold, which had traded as high as $1910 yesterday, extended the biggest drop in four weeks and fell to almost $1856 before finding a bid in Asia. Even if little changed, oil prices are firm, with the July WTI contract hovering around $69 a barrel, consolidating a 4.25% gain this week. 

Marc Chandler

Managing Director
Bannockburn Global Forex
www.bannockburnglobal.com