US markets continued to post small gains, despite continued hot-spots in virus cases across the Southern and Western States, in the USA. Pfizer announced progress on their vaccine, which served to counter the negative virus narrative. The share market gains for the June quarter were enormous, boosted by the continued re-opening of global economies and the record levels of monetary stimulus, should therefore result in big gains for the third and fourth quarter. The US ADP Jobs report added 2.37 million private sector jobs for June and revised May’s loss of 3 million jobs, to a gain of 2.76 million! This is huge news for the US labour markets and bodes well for the Non-Farm Payrolls report.
US ISM Manufacturing surged into positive territory, with the best gains in more than a year, reflecting the strong growth in this sector. The Fed Minutes were cautionary, warning of ‘extraordinary uncertainty and considerable risk’, while standing ready to provide more support. The Dollar drifted lower, with the EUR trading 1.1250, while the GBP jumped to 1.2475. The Tankan report, describing Japanese manufacturing, was negative and dragged Japanese markets lower.
The softer reserve allowed the trade exposed currencies to gain some momentum, with the AUD breaking above 0.6900, while the NZD regained 0.6450. NZ Building Permits spiked, reflecting the re-opening of the economy, Australian Manufacturing PMI data move into expansionary territory. The virus remains a ‘known risk’, but the Geo-Political risks to trade, remain. China has acted extremely aggressively and there will be consequences, but whether they impact the existing supply chain, will be key to the commodity based currencies.