Forex Briefing by Andrew Tratseuski

Thursday’s Briefing

•    Risk Appetite is slowly inching into the market. Commodity Dollars (Australian, New Zealand, and Canadian Dollars are the primary beneficiaries).
•    The Euro is hampered by weak Retail Sales figures; the Euro continues to consolidate near multi-year lows.
•     Traders continue to position themselves for Non Farm Payroll figures. Non Farm Payrolls is among the biggest economic events in the forex markets. 
•    The Japanese economy continues to be hammered by three D’s (debt, deflation, and destabilization in government). Yesterday Prime Minister quit, leading to a believe that the front running replacement of Prime Minister, current Financial Minister Naoto Kan, will follow a policy of weaker Yen.
•    The turnaround in the US economy is certain as companies start to hire new employees. ADP Employment figures showed an increase of jobs for the 4 consecutive months. However, the figure came slightly under the estimate, causing room for concern for the upcoming Non-Farm Payroll figures. ADP showed additional 55,000 jobs being created in May, while April jobs were revised higher to 65,000. However, ADP fails to include government jobs being created, that means thousands of US Census Workers being hired are failed to be included in the figures.
•    Initial Jobless Claims which state the amount of people being laid off fell by 10,000 to 453,000. A positive reading for the US. Continuing Claims rose, meaning people filing for unemployment rose, a bad reading. However, the trend suggests that the US economy finally starting to create jobs.
•    Non Farm Productivity rose 2.8% in the 1st Quarter, while Labor Cost fell 1.3% suggesting that the workers produced more while getting paid less. Slightly positive for US economy.

What are trader’s looking for the Day ahead

•    Factory Orders, a key barometer of industrial sector will be released at 10:00EST. Market is looking for figures to print at 1.3% increase from the previous month. The industrial sector was among the best performers so far in the economy expect numbers to be at least in-line.
•    The most important event for today will be ISM Non-Manufacturing figures. ISM Non-Manufacturing reports the state of Service Sector within the US economy. The index will be released also at 10:00EST. The US economy is dependent on the consumer and the service sector, the service sector represents roughly 70% of the US economy. Therefore, positive figures will be essential for the US economic figures. The market expects a reading of 55.9. A reading of 50 or above represents that the service sector is in expansionary state.