US$ Down Across the Board; Commodities Rally

USD

The U.S. dollar continued its slide from yesterday’s trading session overnight, with the Bloomberg Dollar Index touching a six-week low.  The greenback had pushed higher following Friday’s impressive payrolls numbers, pushing up interest rate expectations. However, yesterday’s disappointing Unit Labor Costs and productivity put a damper on future expectations.

The greenback is under the most pressure versus commodity-based currencies as metals from Palladium to copper shot higher.  The biggest mover is the Norwegian krone, which is benefiting from high inflation data.  Odds that the Norwegian central bank will cut rates to boost the economy dropped after the inflation print.

There is only second tier economic data slated for release today.  JOLTS job openings are expected to increase to 5588 in June from 5500 in May.  The economic docket is unlikely to spark a rebound for the U.S. dollar, so expect traders to take their cues from general market sentiment.

NZD

Commodity-based currencies, such as the Australian dollar and South African rand, rallied overnight as the price of metals soared.  Tin, Zinc and Palladium all hit yearly highs and copper jumped nearly 2.5%.

The New Zealand dollar also rallied 1.0% against the U.S. dollar even before tomorrow’s Reserve Bank of New Zealand meeting that is expected to conclude with an interest rate cut.  Nearly every economist expects the RBNZ to cut interest rates by at least 25 basis points tomorrow.  However, about a quarter of economists expect the central bank to slash rates by 50 basis points. Therefore, if the RBNZ only cuts 25 bp and disappoints some market participants, the NZD could extend its rally.

GBP

The British pound rose for the first time in six days against its American counterpart, sparking speculation that the embattled currency may have carved out a bottom.  The move comes more on general dollar weakness than a positive development in the United Kingdom.

Indeed, the Bank of England had its own problems today as it could not find enough sellers of gilts (bonds) to meet its quota for this week’s attempt at asset buying that it announced last week.  The central bank maintains that it will continue to attempt to buy bonds in an attempt to prop up the economy and lower fixed income yields.