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Top Stories

• Australian Labor data blows out estimates
• All eyes on ECB Press conference at 12:30 GMT
• Nikkei up 2.6% but Europe more muted at 0.6%
• Oil at $74.61/bbl
• Gold holds ground at $1203/oz.

Overnight Eco

• AUD Employment Change 45.9K vs. 15.3K
• AUD Unemployment Rate 5.1% vs. 5.2% eyed
• JPY Core Machinery Orders m/m -9.1% vs -3.0%
• JPY Bank Lending y/y -2.0%
• JPY Current Account .9T vs. 1.12T
• EUR German Trade Balance 10.6B vs. 13.4B
• GBP Manufacturing Production m/m 0.3% vs. 0.4%
• GBP Asset Purchase Facility n/a
• GBP Industrial Production m/m 0.7% vs.0.3.%

Event Risk on Tap

• USD Unemployment Claims expected at 461K
• USD Consumer Credit m/m expected at -1.9B

Price Action

• USD/JPY slides towards 88.00 as risk appetite wanes in Europe
• AUD/USD holds well above .8700 in post data rally
• GBP/USD rejected at 1.5200 as HPI data markedly lower
• EUR/USD consolidats at 1.2660 ahead of ECB meeting

Risk sentiment soared in early Asian trade today on the back of much better that expected Australian unemployment data, but currency traders became decidedly more cautious during European trade ahead of the BoE and ECB rate announcements. Australian unemployment once again surprised to the upside printing at whopping 45.9K versus 15.3K eyed as the unemployment rate declined to 5.1%.

The increase in labor rolls was the highest since February of 2010 while the unemployment rate reached its lowest level in more than a year and the labor participation rate inched to 65.2% versus 65.1% in May. In a testament to the strength of its economy, Australia now enjoys the lowest unemployment rate amongst the G-20 countries as its resource based economy continues to boom on the back of demand from China.

As we noted earlier,” Today’s data serves as strong evidence that any slowdown in global economic demand may simply be a pause rather than a signal of a new contraction as growth in Asia Pacific continues to power the rest of the world.  Nevertheless, some analysts remained skeptical about the sustainability of the recovery rally given the pronounced decline in US economic activity and the poor performance of US labor markets.”

Meanwhile in UK the data was mixed with Halifax HPI showing  a marked slowdown as the index fell -0.6% versus 0.6% eyed while Industrial Production and Manufacturing production retuned back to growth with the former gaining 0.7% and the later rising 0.3%. The UK Manufacturing increased at the fastest annual pace in more than 15 years. Sterling however ignored the data and was pressured from the get go at the start of London dealing after it was unable to hold the 1.5200 level. Despite the pickup in industrial activity  UK economic recovery remains slow and uneven and markets are concerned about growth going forward. Given that background,  1.5200 appears to be a near term top for the pair which is likely  to have a considerably more difficult time rising to 1.5500 unless the risk rally proves to be unexpectedly powerful over the next several days.

In early North American session the market will get the latest commentary from ECB chief Jean Claude Trichet with traders focusing on two specific points. First, reporters are likely to press Mr. Trichet on the state of the stress tests being conducted on European banks and secondly the market will want to know if the ECB will consider the possibility of engaging in quantitative easing given the troubling contraction in money supply over the past several months. As we noted yesterday, given the Budesbanker-lke instincts of the ECB, Mr. Trichet is likely to dismiss any QE talk out of hand which could provide further fuel to the euro rally. If equities build on their gains from yesterday, the pair could make a run at the 1.2700 figure by midday New York trade.  

FX Upcoming

Currency	GMT	EST	Release	Expected	Prior
USD	13:30	8:30	Unemployment Rate	461K	472K
USD	19:00	15:00	Consumer Credit m/m	-1.9B	1.0B

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.