Risk-aversion eases on trade headlines, lack of catalysts ahead of US NFP

Global markets witnessed a pause in risk-off during late Wednesday and the same got extension during early Thursday amid a lack of major data/events. Adding to the cautious optimism were softer US data and headlines suggesting improvements in trade terms between the US and China, as well as between Beijing and Russia.

The improvement in the market sentiment triggers the US dollar’s pullback from a 20-year high, which in turn allowed prices of gold and crude oil to pare recent losses. 

Further, GBPUSD also ignored political drama at home to cheer on USD weakness while upbeat Aussie trade numbers and China’s readiness for more stimulus helped NZDUSD and AUDUSD to lead the recovery among the G10 currency pairs.

However, the recession fears exert downside pressure on yields while cryptocurrencies also struggled.

Following are the latest moves of the key assets:

• Brent oil bounces off 10-week low to regain $103.50, up 1.5% intraday.
• Gold snaps three-day downtrend to recover from yearly bottom, up 0.30% to $1,745 at the latest.
• USD Index remains pressured around 20-year high with mild losses near 107.00.
• FTSE 100 rises 0.5% but STOXX50 and DAX are both gaining around 1.5% on a day.
• Wall Street benchmarks closed with mild gains on Wednesday.
• BTCUSD stays defensive at around $20,500 while the ETHUSD also losses near 0.80% intraday to $1,180 at the latest.

Traders brace for Friday’s NFP

With cancellation of the US ADP Employment Change, previously up for publishing today, traders have little to hear on the economic slowdown and hence adhered to the short-covering moves. China’s change in vehicle consumption, 500 billion yuan infrastructure plan and readiness to tighten trade ties with the US and Russia also added to the cautious optimism.

Furthermore, Wednesday’s softer US ISM Services PMI and downbeat JOLTS Job Openings also offered a reason for the USD to ease from the multi-year high.

However, a jump in Shanghai’s covid numbers and grim comments from IMF keeps the bulls away, which in turn pressured the US Treasury yields.

It should be noted that a jump in Australia trade numbers for May added strength to the AUDUSD and the numbers were joined by China-linked headlines to also favor the NZDUSD bulls.

GBPUSD withstands the multiple key resignations from the UK cabinet as PM Boris Johnson remains hopeful and gains support from his Brexit view.

Gold bounces off a yearly low while oil also licks its wounds after a heavy fall in the last two days.

Moving on, Bloomberg’s piece suggests a bullish wave for the cryptocurrencies in the next six months but failed to lure the BTCUSD and the ETHUSD buyers as traders fear more pain going forward.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD

Second-tier data, sentiment to guide traders

With the US ADP data out of the list until late August, the weekly prints of US jobless claims and monthly trade numbers are important to watch for intraday directions. However, major attention will be given to Friday’s US jobs report as FOMC Minutes hyped another 0.75% rate hike from the Fed.

Elsewhere, UK politics, ECB Meeting Minutes and chatters surrounding China, as well as economic slowdown, could offer additional details to forecast near-term market moves.

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