The persistent sell-off in bond markets has left global markets with little assurance, one day before the next Greek debt deadline, US May non-farm payrolls and an extremely important OPEC meeting. Following the non-event that was yesterday’s European Central Bank meeting, the euro continues its surge this morning despite no final agreement between Greece and its many creditors. Although ECB Chairman Mario Draghi did not make any comments towards Greece, the euro did find support as the ECB raised inflation targets into 2016 and touted its QE program. Greek PM Alexis Tsipras left talks with senior EU officials on Wednesday saying a deal was within sight and although some agreements have been made, there remains work to be done. German 10-year Bund yields rose to new 2015 highs putting five month highs to test for the euro. As global equities remain a sea of red amid this uncertainty, safe haven assets such as gold and the Swiss franc pace markets with the dollar losing favor with investors around the world.
The euro remains the currency du jour, as German bund yields keep a bid tone filtering through the foreign exchange market. Although there were very little expectations for yesterday’s ECB meeting, Chairman Draghi did get things moving as the central bank forecasts faster inflation in 2016 and 2017. Despite much uncertainty hanging over the Greek negotiations, at the end of the day it would be quite a surprise if European leaders did not strike an accord, with more than €1.5 billion to be paid back to creditors in June. Both sides are working toward a new “final deadline” of June 14th to bring some kind of calm to markets. Despite Mr. Draghi’s assurance that volatility is here to stay, judgment should be held after this week’s many key events, meetings and deadlines.
Turning to North America, the US dollar continues to lose ground despite stronger than expected weekly jobless claims this morning. On Wednesday it was reported that the pace of growth in the US services sector slowed in May. The Institute for Supply Management said its services index fell to 55.7 from 57.8 in April. As the services sector remain the driving force in the US labor market, this is more troubling news ahead of tomorrow’s important jobs report where 225k new jobs are expected. Following Monday’s decline in the greenback, its worst day since July 2013, the dollar remains on the defensive with much to be decided before the weekend.Tomorrow’s OPEC meeting and non-farm payrolls report will be significant ahead of this month’s FOMC policy meeting.
Canada will get a look at the May Ivey PMI at 10am EST, with markets expecting business confidence in Canada to remain strong with a reading of 55.5. Commodity prices, currently in a state of flux ahead of tomorrow’s OPEC meetings, has had a strong impact on currencies such as the CAD this week. The USDCAD rate remains elevated despite this week’s decline in the greenback, and it would appear that OPEC has no plans to reduce production and give back any ground concerning their market share. Canada will also be releasing its May jobs report tomorrow, with 10k new jobs expected following April’s 19.7k decline.
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