June arrives with traders overseas in a positive mood. The Nikkei rallied 1.0% this morning while the Dax and FTSE are both up 0.4%. US traders have been more cautious with US index futures flat.
The US Dollar is up moderately against pretty much everything as traders speculate on a potential June rate hike. Earlier this week, Fed Governor Brainard, a leading dove, left the door open to an increase. Overnight, SF Fed President Williams indicated he still expects 3 maybe 4 hikes this year depending on the economy. Today, Fed Governor Powell is speaking on policy normalization which could give more insight into plans for rate hikes and how the Fed intends to start running down its balance sheet.
Today's economic data may also influence interest rate speculation in the US Dollar. ADP payrolls are the main hard data point and came in with big positive surprise of 253K way above street expectations adding to the case for a rate hike. Manufacturing PMI is the main soft data point. Traders may look for evidence of whether yesterday's soft Chicago PMI is isolated or a sign od a bigger slowdown. For nonfarm payrolls tomorrow, I think it would take a very negative surprise to knock the Fed off course with the economy near full employment.
Crude oil may also be active again today. Two days of declines were halted by a huge 8.7 mmbbl drawdown in API inventories announced late yesterday, and traders may look to the DOE figures for confirmation. Note that as is normal in a US holiday week, DOE inventories will be out at 1100 am EDT rather than the usual 1030 am.
Highlights of overnight included: China Caixin PMI fell below 50, a sign of potential trouble, while Australia slowed dramatically. Italy GDP was better than expected (which could encourage the government to call an early election). Greece manufacturing PMI improved but did not quite regain 50 (too little too late?) UK manufacturing PMI was slightly above expectations.
Sterling has been underperforming other majors today. The UK election is fast approaching, now only a week from today. There has been a wide variation in polls lately with some giving the Tories a 10 percentage plus point lead to grow PM May's majority and some suggesting she could end up losing her majority. Having been caught so badly offside in last year's Brexit Referendum, traders are likely to take a different, less complacent approach to this vote which could keep GBP pairs active in the coming days.
There have been no major corporate announcements this morning.
Significant announcements released overnight include:
Italy GDP 1.2% vs street 0.8%
Japan capital spending 4.5% vs street 4.0%
Australia retail sales 1.0% vs street 0.3%
Australia commodity index  32.6% vs previous 38.6%
Manufacturing PMI Reports:
UK 56.7 vs street 56.5
Germany 59.5 vs street 59.4
France 53.8 vs street 54.0
Spain 55.4 vs street 54.7
Italy 55.1 vs street 56.0
Norway 54.3 vs street 55.0
Greece 49.6 vs previous 48.2
Australia 54.8 vs previous 59.2
Japan 53.1 vs previous 52.0
China Caixin 49.6 vs street 50.1
Upcoming significant economic announcements include:
8:00 am EDT FOMC Powell speaking
8:15 am EDT US ADP Payrolls street 180K vs previous 177K
8:30 am EDT US jobless claims street 238K
10:00 am EDT US construction spending street 0.5% vs previous (0.2%)
10:30 am EDT US natural gas   street 81 BCF
11:00 am EDT US DOE crude oil inventories street (3.0 mmbbls)
11:00 am EDT US DOE gasoline inventories street (1.5 mmbbls)
Manufacturing PMI Reports:
9:30 am EDT Canada previous 55.9
9:45 am EDT US Markit street 52.5
10:00 am EDT US ISM PMI street 54.6
10:00 am EDT US ISM prices paid street 67.0
10:00 am EDT US ISM employment previous 52.0
10:00 am EDT US ISM new orders previous 57.5
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