US recap: EUR/USD capitalizes as dollar succumbs to data doldrums
July 3 (Reuters) -The dollar fell against the majors on Wednesday -- except the yen -- after a slew of unexpectedly weak data reinforced market suspicions that the U.S. economy is cooling in a way that will allow the Fed to consider rate cuts.
Minutes from the Fed's June 11-12 meeting echoed this sentiment.
The vast majority of FOMC participants assessed the economy as gradually cooling, while May's CPI reading was seen by participants as providing additional evidence of progress toward their inflation goal and a number said the U.S. central bank should stand ready to respond to unexpected economic weakness.
June ISM services PMI fell unexpectedly into contraction, with new orders shrinking and growth in prices paid decelerating. The employment gauge within the ISM report also deepened its previous contraction.
Factory orders fell in May, confounding the Reuters consensus forecast for a rise, while initial jobless claims rose 3k more than forecast and ADP private sector employment growth decelerated unexpectedly.
The data came as investors were gearing up for a U.S. holiday on Thursday followed by the government's monthly employment report on Friday.
Within the FOMC minutes, several participants specifically emphasized that further demand weakening could generate a larger unemployment response than in the recent past.
EUR/USD struck a three-week high, USD/JPY climbed to yet another 38-year peak, cable advanced to its strongest since June 13 and AUD/USD rose to levels not seen since January.
U.S. Treasury yields fell 3-8bp and the 2s-10s curve flattened 3bp to -34.5bp.
The S&P 500 gained 0.51% and along with Nasdaq posted a record high close, as data raised hopes that the Federal Reserve could cut interest rates in September.
WTI gained 0.75% after a larger-than-expected decline in U.S. crude stocks, but thin trading ahead of the U.S. Independence Day holiday and concerns about rising global inventories limited any rise in crude prices.
Copper rallied 2.47%, rising for a fourth straight session with the help of signs of firmer demand in China and buying by computer-driven funds. The weaker dollar and heightened U.S. rate cut expectations also provided support.
Gold advanced 1.17% to a near two-week high, helped by increased focus on a potential September Fed interest rate cut following the U.S. economic reports.
Heading toward the close: EUR/USD +0.34%, USD/JPY +0.00%, GBP/USD +0.43%, AUD/USD +0.58%.
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(Burton Frierson)
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