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    USD stabilises after Friday’s jobs report

    Market Brief

    G10 Advancers and Decliners vs USD
    CHF -0.14
    NOK -0.15
    DKK -0.24
    EUR -0.24
    SEK -0.28
    CAD -0.32
    JPY -0.42
    AUD -0.48
    NZD -0.69
    GBP -0.98
    Global Indexes Current Level % Change
    Nikkei 225 Index 16580.03 -0.37
    Hang Seng Index 20945.75 -0.01
    Shanghai Index 2928.071 -0.36
    FTSE futures 6225.5 0.49
    DAX futures 10109.5 0.19
    SMI Futures 8157 0.16
    S&P future 2097 -0.04
    Global Indexes Current Level % Change
    Gold 1241.2 -0.24
    Silver 16.39 -0.18
    VIX 13.47 -1.17
    Crude wti 49.04 0.86
    USD Index 94.25 0.24

    The last US jobs report widely missed consensus and seriously jeopardized a summer rate hike. This was just the straw that broke the camel’s back and the market is fully aware of the implications of Friday’s NFP. The US economy created 38k private jobs in May, missing estimates of 160k, while the previous month’s figures were downwardly revised to 123k from 160k. The unemployment rate fell to 4.7% from 5% in April; however labour force participation fell to 62.6% from 62.8%, which suggests that more workers were left out of the U-3 statistic. The jobs report was followed by the release of a weaker ISM non-manufacturing composite, which slipped to 52.9 in May from 55.7 and missed the median forecast of 55.3. The USD was heavily sold off on Friday and plummeted against almost all currencies.

    EUR/USD surged more than 2% and hit 1.1374 before stabilising at around 1.1340 during the Asian session. On the upside, a resistance lies at 1.1447 (high from May 11th), while on the downside a support can be found at around 1.12 (previous resistance, now support). Even though we believe the pair will have to consolidate gains before starting to move higher again, this afternoon’s speech from Fed Chair Yellen could extend the US debasement in case of extremely dovish comments.

    In the UK, the pound sterling has already erased Friday’s sharp gains against the greenback after a recent Brexit poll showed that the “yes” to leave the European Union is gaining traction. GBP/USD fell 0.90% in Tokyo to 1.4353. The pair is about to test the 1.4333 support from May 16th. We expect the pair will continue moving within its wide range between 1.43 and 1.48 ahead of June 23rd.

    The Australian dollar also erased Friday’s gains but only partially. AUD/USD slid slowly to 0.7315 from 0.7370 amid weaker inflation figures. The Melbourne institute inflation gauge contracted 0.2%m/m in May, down from a 0.1% increase in April, suggesting that the RBA still has plenty of room to further ease its monetary policy.

    In the equity market, Asian markets were mixed this morning, struggling to find clarity vis-a-vis the Fed tightening cycle. In Japan, the Nikkei was down 0.37% and the Topix index slid 0.36%. In mainland China the CSI 300 fell 0.45%, while offshore Hong Kong’s Hang Seng remained unchanged. Australian and Singaporean equities were blinking green, with the first one rising 0.78% and the latter 0.63%. In Europe, futures are pointing to a higher open as the main indices edge higher.

    Today traders will be watching factory orders from Germany; sight deposits from Switzerland; Markit retail PMI from Germany and the euro zone; ECB’s Coeuré, Nowotny and Constancio will speak; Fed Chair Yellen will also speak later this afternoon.


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