• Twin reports from a high-profile US consulting firm help undermine euro. One report says SNB cannot sustain intervention in EUR/CHF. Second report says conditions are sufficiently dire in the euro money markets that the ECB may renew its 1-year LTRO which pumped over EUR 440 bln into the market last June
  • Fears that Hungary is the next Greece helped further undermine euro as EU resources would be further strained.
  • ADP employment report predicts private sector jobs will grow only 55,000
  • Non-manufacturing ISM index steady at 55.4 in May
  • Q1 US Non-farm productivity revised to +2.8% from up 3.6%
  • Factory orders rise 1.2%, weaker than expected
  • Spanish bond spreads close at widest levels since introduction of euro at 1.90% over 10 year bunds
  • Bernanke: Still concerned about high unemployment
  • Fed’s Hoenig: Fed should hike to 1% by end of summer, to 3% quickly; hikes could be greater than 25 bp at a time. Though hawkish, comments are out of step with rest of FOMC…
  • EU finance minister to adopt tighter budget rules next week
  • S&P 500 shrugs off midday weakness, closes up 0.4%
  • US bond yields erase early gains, end flat at 3.37%
  • Gold falls $20 to $1205, copper down 2.6%, oil up $1.75 to $74.62

The failure to maintain levels above 1.23 and the top two bullet points at the top of the list help summarize why EUR/USD came back under heavy pressure today. We fell as low as 1.2152 and end the session very close to the lows. Protection of 1.2100 barriers is expected from about the 1.2110 area and central bank bids can’t be ruled out after a wave of selling from the usual suspects around the 1.2320 level in London this morning.

EUR/CHF crumbled from 1.4140 to 1.4060 lows on the research note predicting the SNB was reaching its limit on intervention. Keep in mind, this same firm also predicted the BOC would not hike this week…

USD/JPY held the bulk of its gains, supported by momentum players, hopes for the weak JPY loving Kan to be anointed PM and continued tensions on the Korean peninsula. It reached 92.80 in early New York trade and ends at 92.65. Selling is seen heavy in the 93.00/15 area on rallies.

Commodity currencies see-sawed today as risk waxed and waned. USD/CAD rallied into the 1.0460s before reports of Chinese selling interest from the low 1.0480s prompted dealers to think twice. A recovery in crude helped send the buck back below 1.0400 in the late afternoon and we trade at 1.0405 late in the day. Canadian employment data is due tomorrow at the crack of dawn. +15,000 is expected.

US nonfarm payrolls are tomorrow’s early event risk. Whisper numbers of 700,000+ have been heard this afternoon, most of them census jobs. Goldman sees 600,000 but only 150,000 private sector jobs. The consensus if for 513k including census workers/191k for private sector jobs.