SCOREBOARD: US coin toss

There was a fairly sizeable sell-off on the US dollar last night, especially USD-JPY which now sits at around 97.11 from 99.11. But the yen wasn’t the only big move. The euro spiked 130 pips to 1.3244, the British pound was up 175 pips to 1.5602 and even the Aussie peso managed to shake off the recession blues and  poke its head back over 0.96 (where it holds just as I write) – up about 150 pips.

As to what drove this sudden US dollar sell-off, I’m not 100 per cent sure to be honest. Newswires and the press put it down to uncertainty over the strength of the US recovery, although I don’t think there are really any serious doubts about that given the dataflow, which has been positive. Don’t forget the Beige Book yesterday, and last night we found out that jobless claims fell to 346,000 from 357,000. Only a 10,000 fall, granted – nothing earth shattering – but it’s low, and in the right direction. Nothing obviously that would get anyone worked up about a downturn or anything.

Added to that is the fact that recent data also shows US household wealth at a record high at $70 trillion dollars (Dr Evil pose). Another major UK paper suggests it’s because of fears QE could be reined, but of course that doesn’t even make sense. It’s some big positioning, whatever the cause, coming just before payrolls. But in a world where central banks interfere and dominate nearly every market, we will never really know.

The move in the euro is perhaps a little easier to explain. The European Central Bank met last night and didn’t move rates or take any further action on the stimulus front. Indeed, chief Mario Draghi suggested that while the bank stood ready to act again if needed, the consensus view was that a recovery was in place and that further stimulus measures were “on the shelf” for now.

It could be the case then that this commentary from the European bank, coupled with disappointment on Japanese stimulus measures, saw some repositioning of US dollar longs. But as mentioned, in these increasingly cloudy markets, one can never be sure.

As for the impact elsewhere, the weaker US dollar helped lift commodity prices, with crude up 1 per cent to $94.67. Silver rose 0.5 per cent and gold was up $14 to $1413. Copper, however, fell 1.3 per cent.

We also saw US stocks push higher – decent gains, with the S&P500 closing 0.9 per cent higher (1622), the Dow up 80 points to 15,040 and the Nasdaq rising 0.7 per cent (3424). Looking at the key sectors, gains seem to be fairly broad-based although health, telecommunications, financials and utilities look to have outperformed.

That was pretty much it for the session. As for US Treasuries, they bounced around – the 10-year on a 12 bps range – but ended little changed, with the 10-year at 2.08 per cent.

In other news and data, the Bank of England held rates steady and refrained from printing more money for the moment. Still in the UK, house prices rose almost 3 per cent in the three months to May, while in Germany factory orders fell 2.3 per cent in April, offsetting a 2.3 per cent gain the month prior.

Otherwise, and of interest, is the spat between the International Monetary Fund and Europeans over who bungled the Greek bailout more. The IMF says Greek debt should have been restructured from the outset; the Europeans state that this would have risked system-wide contagion. I don’t think there’s much point in discussing it, and the IMF hasn’t exactly done a great job over the years.

Looking at the day ahead, the SPI suggests our market will rise a whole point. Other than that there isn’t much. Tonight of course it’s all about payrolls and the market looks for a gain of about 165,000, with the unemployment rate forecast to remain unchanged at 7.5 per cent. Outside of that it’s also worth looking out for German industrial production and trade data.

That’s the lot, hope you have a restful long weekend.

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.