The dollar is losing ground against all of its major competitors on Wednesday. Equity markets will close early in the U.S. today and will be closed all day Thursday for the Fourth of July holiday. Investors will be watching for news from the monetary policy meetings of the ECB and the BoE on Thursday, as well as the U.S. jobs report for June on Friday.
Employment in the U.S. private sector rose by more than anticipated in the month of June, according to a report released by payroll processor Automatic Data Processing, Inc. (ADP) on Wednesday.
ADP said private sector employment increased by 188,000 jobs in June following a downwardly revised increase of 134,000 jobs in May. Economists had expected the private sector to add about 160,000 jobs compared to the addition of 135,000 jobs originally reported for the previous month.
In an upbeat sign for the labor market, the Labor Department released a report on Wednesday showing another modest decrease in first-time claims for U.S. unemployment benefits in the week ended June 29th.
The report said initial jobless claims dipped to 343,000, a decrease of 5,000 from the previous week’s revised figure of 348,000. Economists had been expecting jobless claims to edge down to 345,000 from the 346,000 originally reported for the previous week.
With exports falling and imports rising, the Commerce Department released a report on Wednesday showing that the U.S. trade deficit widened by much more than anticipated in the month of May. The report said the trade deficit widened to $45.0 billion in May from a revised $40.1 billion in April. Economists had expected the deficit to widen to $40.8 billion.
Economic activity in the U.S. service sector continued to expand in the month of June, according to a report released by the Institute for Supply Management on Wednesday, although the pace of growth unexpectedly slowed compared to the previous month.
The ISM said its non-manufacturing index dropped to 52.2 in June from 53.7 in May, with a reading above 50 indicating growth in the service sector. The decrease came as a surprise to economists, who had expected the index to climb to 54.5.
Portugal’s borrowing costs surged on Wednesday following the back-to-back resignation of ministers from Prime Minister Pedro Passos Coelho’s coalition government that risks early election in the country that is struggling hard to keep austerity measures on track.
The yield on Portugal’s benchmark 10-year bonds exceeded 8 percent early today the highest since November, underlining the additional return that investors seek to take risk.
Foreign Affairs Minister Paulo Portas tendered his resignation on Tuesday, in protest over appointing Maria Luis Albuquerque as finance minister after Vitor Gaspar quit his job on Monday. Late yesterday, Prime Minister Coelho reportedly vowed that he will not step down and said he has not accepted the resignation of Portas.
According to the Portuguese media outlets, Agriculture Minister Assuncao Cristas and Social Security Minister Pedro Mota Soares will also offer their resignations today.
European Central Bank Chief Mario Draghi met Cyprus President Nicos Anastasiades on Wednesday to discuss the on-going economic reforms of the country, the central bank said in a statement.
Anastasiades visited the ECB along with Finance Minister Harris Georgiades and Central Bank of Cyprus Governor Panicos Demetriades. ECB Executive Board Members Jorg Asmussen and Benoit Coeure also took part in the meeting.
“The meeting consisted of an exchange of views on the on-going implementation of the macroeconomic adjustment programme in Cyprus,” the ECB said. “Both parties agreed that, in the period ahead, one priority is to bring Bank of Cyprus out of resolution.”
Despite the progress made by Greece, the country still has much more to do to complete a positive review by “Troika”, European Central Bank Executive Board member Joerg Asmussen told a German newspaper on Wednesday. But talks of debt write-downs were unhelpful as they distract from the necessary reform efforts, he told Die Welt newspaper.
The dollar rose to an early 1-month high of $1.2922 against the Euro on Wednesday, but has since pulled back to around $1.3000.
Retail sales in the euro area returned to growth in May after falling for three months in a row, and the rate of growth far exceeded economists’ expectations, latest data showed Wednesday. Retail sales increased 1 percent on a monthly basis in May, recovering from April’s upwardly revised 0.2 percent decrease, statistical office Eurostat said. Economists had forecast sales to record a 0.3 percent growth following April’s originally reported 0.5 percent contraction.
Eurozone’s private sector contraction eased in June, amid slower declines in employment and new orders, final results of a survey by Markit Economics showed Wednesday. The composite output index, that measures both manufacturing and service sector activities, rose to 48.7 in June from 4.7.7 in May. The score was a tad below the flash estimate of 48.9.
The Germany service sector returned to growth in June after shrinking in the previous two months, but the rate of growth was slower than initially estimated, final data released by Markit Economics and BME showed Wednesday.
The seasonally adjusted purchasing managers’ index for the service sector rose to a three-month high of 50.4 in June from 49.7 in May, moving above the no-change 50 mark – which separates growth from contraction – for the second successive month. The revised score was, however, notably lower than 51.3 estimated earlier.
The French business activity contracted at the slowest pace in ten months, and the rate of decline was slower than initially estimated in June, final data from Markit Economics showed Wednesday. The composite output index, which measures performance of both manufacturing and service sectors, rose to 47.4 in June, from 44.6 in May. The reading stood above the flash estimate of 46.8.
U.K. banks expect further increase in credit availability for households in the third quarter, but little changes for corporates, the second quarter credit conditions survey from the Bank of England showed Wednesday.
In the three months to end-May, lenders reported an increase in credit availability to households and corporates. The survey was conducted between May 10 and May 31.
Lenders reported that household demand for secured lending had risen significantly in the second quarter. In contrast, household demand for unsecured lending fell significantly, reflecting lower demand for credit card lending, survey data revealed.
The greenback began Wednesday’s session around $1.5150 against the pound sterling, but has since dropped to a 4-session low of $1.5300.
British service sector growth accelerated to its highest level in over two years in June, supported by the strongest gain in new businesses since 2007, a survey by Markit Economics and the Chartered Institute of Purchasing & Supply showed Wednesday. The headline Business Activity Index recorded 56.9 in June, the highest since March 2011. In May, the index showed a reading of 54.9.
Shop price inflation in the UK declined in June at the fastest pace since February 2007 as volatile weather pushed down non-food costs, the British Retail Consortium (BRC) said in a report on Wednesday. The BRC-Nielsen shop price index declined 0.2 percent year-on-year in June, the biggest fall since February 2007. This followed a 0.1 percent drop in May.
The buck has also retreated from an early high of Y100.816 against the Japanese Yen on Wednesday, to around Y99.775.