The dollar has traded mixed in what have been largely narrow ranges so far today. EUR-USD edged a six-day low at 1.1842 while the DXY dollar index printed a five-day high at 92.19 before both settled back at near mid-range levels. Various countervailing forces are curtailing directional ambition in EUR-USD, not least the ongoing dovish commitment at both the ECB and Fed.
The July U.S. jobs report, due Friday, is looming up and will be a key influencer for markets in assessing the Fed’s course to tapering, with policymakers looking for “sufficient progress” in the labor market before heading to the tightening lever. We’re expecting a strong report (with a 600k headline), but one-off pandemic era factors may once again be evident in holding progress up.
Bonds and stocks rallied Tuesday and while they continued to trade on the same basic factors, the markets are moving to their own beats. The surging Delta virus, growth uncertainties, earnings, central bank policies, and momentum. Treasury yields richened at the open and the rally was extended into the afternoon until buying petered out and rates drifted northward. The 10-year rate slid to 1.152% and the 30-year was at 1.827% into the afternoon but closed at 1.177% and 1.85%, respectively.
The 2-year also continued to push back on QE tapering and tightening risks. The rate has been in retreat since hitting 0.269% in late June and fell to 0.170%, not far from the 0.155% area where it was before the June 16 FOMC shocked with the upward push in the dots. And Wall Street, after a choppy start, found its footing through the afternoon and posted solid gains with the Dow and S&P 500 up 0.8%, while the NASDAQ increased 0.55%.
The July ADP private payroll report highlights today where we expect a 500k increase, versus the previous 692k rise. The July services ISM is penciled in improving to 61.0 from 60.1. Weekly MBA mortgage and weekly oil inventory figures are also on tap.
For Fedspeak, comments from Clarida will be of interest after various policymakers have argued for QE tapering later this year. He speaks at the Peterson Institute on monetary policy. The earnings calendar features from CVS Health, Booking Holdings, Uber, GM, Roku, Emerson Electric, Honda, MetLife, Kraft Heinz, Trane, T. Rowe Price, Exelon, EOG Resources, Electronic Arts, Allstate, Manulife, Marathon Petroleum, ANSYS, McKesson, Sun Life, MPLX, Etsy, CDW, Amerisource Bergen, Vulcan Materials, FleetCor, Fox, Charles River Labs, MGM resorts, GoDaddy, and Apollo Global.