This Friday could have been the turning point for the US dollar. The extremely disappointing increase in jobs in May proved for many that market expectations for Fed’s rate hike in the upcoming months had been exaggerated and it pushed dollar to the point from the start of May.
The headline NFP number of 38k was the lowest since September 2011 and the additional downward revision to last month’s reading heaped more woe on an already worrying report. Not long afterwards the ISM non-manufacturing number was also below expectations and failed to offer a reprieve for the buck. In light of this expectations for another FOMC rate hike in the short term have been moved even lower and banks such as Barclays and BNP Paribas have revised their forecasts to a more dovish stance.
Stock markets have been rocked by the weakness these latest data points have highlighted with the Dax (-1.32%) dropping by more than 100 ticks. On the other hand, with lower expectations for rate hike the US indices managed to pare almost all of their losses from today - the US500 has returned to 2100 pts.
In the commodity space the biggest mover has been Gold ( 2.58%) which has received a double boost in the depreciation of the us dollar as well as some safe haven flows. The precious metal trades up by more than $25 on the day at $1243/oz. Crude benchmarks have been relatively quite today but WTI (-0.80%). It’s also worth noticing that for the second time this year number of the US oil rotary rigs has risen during the week.
European PMI’s turned out to be in line with what the market was expecting with a nastry surprise from Italy. We cannot observe any reaction on the data, but a trend in Italy’s economy is quite worrying. The country struggles with its banking sector and if the economy is to slow further, it may herald a greater problem for the European indices. As for the UK, the data was surprisingly strong.
Next week kicks of in earnest on Monday evening with Fed chair Yellen speaking at 17:30 before the RBA rate decision at 05:30 on Tuesday morning. Chinese Trade balance overnight on Tuesday could be important before the RBNZ rate decision comes on Wednesday night at 22:00. Canadian employment change is out at 13:30 on Friday before University of Michigan consumer sentiment rounds off the week at 15:00.
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