After last Friday's disappointing ADP release, rate cuts may again become possible and remain on track to take place in 2017.

Markets continue to support the US Dollar following ADP release and, despite weak JOLTS data on Tuesday, have kept it above 104.00 and look set for resistance testing near-term upside.

On Wednesday, the US Dollar (USD) crept higher for a second consecutive day, though its index tracking its value against six major currencies remained negative during a week after Monday’s meltdown. Although Tuesday’s JOLTS Job Openings Report for April showed another decrease, even falling below consensus, its wages element still pointed towards higher salaries being paid, representing one key indicator driving US inflation forecasting and outlook.

On the economic front, all eyes are currently focused on Automatic Data Processing (ADP) and Institute for Supply Management (ISM). ADP has already released their monthly Employment Change ahead of Friday’s official US Employment report while ISM will offer more insight on Services sector activity – its lackluster performance about Manufacturing being one of many drivers behind Monday’s destabilisation in US dollar price action.

Daily Market Movers: ADPeasing Moves Rate Cuts Forward

On Monday morning, Mortgage Bankers Association (MBA) unveiled its Mortgage Applications number for May’s final week and found it had decreased -5.2% relative to last week and -5.7% from a week prior.
ADP Employment Change data for May was significantly below consensus expectations of 173,000 increases against April’s reading of 192,000 increases; actual increase was 152,000 while 192,000 got revised down to 188,000, thus producing both an actual print and revision that were more modest in nature than anticipated.
At 13:45 GMT, S&P Global will unveil its final readings of both Services and Composite Purchasing Managers Indexs for May. Services is expected to remain at 54.8, while composite may reach 54-444 similar to preliminary readings.
At 14:00 GMT, the Institute for Supply Management will release their Services sector PMI for May. Employment component was at 44.9 in April with no forecast available and 52.2 was the new orders index value recorded during April.
Headline Services PMI should return to expansion, reaching 50.5 from 49.4 in April; Prices Paid index registered 59.2, but there was no forecast provided at that time.
Equities traded mixed Wednesday in Europe’s trading session. Mild losses or gains occurred, though no outliers can be reported at this point in time.
According to CME Fedwatch Tool’s pricing data for Fed Fund futures pricing data suggests a 35.1% chance that rates remain unchanged in September against 55.3% chance for 25 basis point (bps) cut and 9.6% for 50 bps cut respectively. An interest rate hike no longer represents an option – futures pricing anticipate an unchanged result at June 12 meeting meeting.
The benchmark 10-year US Treasury Note currently trades around 4.33%, near its monthly low point of 4.32%.

US Dollar Index Technical Analysis: American Deficit Reduction Acteasing

The US Dollar Index (DXY) attempted to make up its losses on Monday through a second day. While signs of Dollar weakness began showing through in price action, markets didn’t quickly pick up on another element from JOLTS report: employers remain willing to offer higher wages even with reduced job openings; thus keeping one key driver of US inflation alive.

On the upside, DXY initially encounters double resistance from its 200-day and 100-day Simple Moving Averages at 104.43 and 104.42, respectively. Next up comes pivotal resistance near 104.60 where 55-day SMA lines up perfectly with this round number as recent topside peak has occurred at 105.00.

On the downside, the Greenback remains trapped within an air pocket area in which it seems 104.00 is holding firm. Once through there, another decline to 103.50 or even 103.00 should take place as its Relative Strength Index (RSI) still doesn’t suggest overselling has taken place – further downside consideration is still viable.

Central Bank FAQs
A central bank’s primary responsibility is ensuring price stability across a country or region. As economies fluctuate between inflation and deflation when certain goods and services prices fluctuate – rising or falling prices equal inflation while consistently lower costs indicate deflation – central banks aim to stabilize demand through regular adjustments of policy rates, including for big players like US Federal Reserve (Fed), European Central Bank (ECB), or Bank of England (BoE). Their mandates aim to achieve inflation of approximately two percent per year or lower.

Central banks possess one effective tool at their disposal to alter inflation levels by manipulating their benchmark policy rate, commonly referred to as interest rate. On predetermined occasions, central banks issue statements with their policy rate and explain whether or not it has changed (decreasing or increasing). Local banks will adjust savings and lending rates accordingly, which in turn makes it harder or easier for individuals and companies to earn returns from savings accounts or take out loans and invest in their business ventures. When interest rates increase significantly due to central bank action (called “monetary tightening”) or fall significantly due to cuts made (known as “monetary easing”).

A central bank should remain politically independent. All members of its policy board undergo extensive hearings before being chosen as policy board members; each of them often holds strong convictions on how best to control inflation and devise subsequent monetary policy; those preferring loose monetary conditions characterized by low rates and cheap lending which aim to boost economic activity while leaving inflation above 2% are known as doves; those wanting higher interest rates to reward savings while keeping tabs on inflation at all times are called hawks who will remain vigilant until inflation falls to or just below this figure is reached –

Normaly, each meeting is led by a chairman or president who facilitates discussions among various factions (hawks vs. doves ), reaching consensus between them as quickly as possible and being decisive when needed in case there’s no voting majority available to avoid an impasse preventing an equal share on whether current policy should change or remain as is. A central bank’s chairman often delivers live, streaming speeches where their current monetary stance and outlook is communicated to stakeholders. Aiming for stability when applying its policy without sparking violent fluctuations in rates, stocks or its own currency. All members of a central bank will prepare their markets stance in advance of an important policy meeting event, known as an official policy meeting or policy announcement event. A few days prior to such meetings and up until their results have been publicly communicated is known as the blackout period for members who cannot freely discuss policy openly – this period of silence known as blackout period is strictly enforced by central banks.