USD lower after Friday's disappointing US nonfarm payrolls

Good morning

I hope you had a terrific weekend.  I did get a few jobs done in the garden but have to confess I spent a fair amount of time lounging around outside which made for a very pleasant weekend.

US nonfarms Friday very much surprised to the downside, coming in at -23k against an expected +80k, with previous data also revised lower.  Average earnings were also lower but somewhat the unemployment rate dipped to 4.1%.  US dollar softened with GBPUSD and EURUSD trading to 1.3510 and 1.1580, which for EURUSD was the highest it’s been since mid-June.  This data must surely offer doubt as to potential for a Fed rate rise which started to look more likely..

JPY took advantage of the softer USD with USDJPY dipping to 156.65 initially before settling back in the 157.70 area, but overnight it pushed higher again, now 158.45, pretty much the same as it was before the nonfarms, unlike other majors which have help most of their post-nonfarm gains against USD.  GBPUSD and EURUSD are currently 1.3494 and 1.1555.

Plenty of talk over the weekend over Iran and the Strait of Hormuz, none of which would please Trump as far as I can see, with Iran looking for compensation from US for damage relating to the war.  Meanwhile there are suggestions Trump is considering calling it a day in Iran whether or not he gets a deal on Iran’s nuclear programme, in order to get energy flowing once again.  There is talk that European airlines are struggling for jet fuel which could lead to some flight disruption in the coming weeks.

When I was in Morocco just one week ago I did wonder why the vast swathes of barren land were not filled with solar panels.  Now I am reading that the EU is investing billions of Euro’s in renewable energy projects across North Africa.  I’m not sure it is windy enough for windfarms but it is certainly sunny enough for solar.

Still, the UK has had it’s fair share of sunshine this year and it looks like temperatures will remain high this week, with another spike up above 30°c forecast for much of the week.  Hopefully  the skies will be clear for the partial solar eclipse on Wednesday, which also happens to be the peak activity in the Perseid meteor shower.  It has been a while since I stayed up to watch that but with the weather as it is maybe it’s a good time to sit outside and stare at the sky for an hour or so after midnight.

Not a great deal on the calendar today, but early tomorrow morning we’ll have the latest RBA rate announcement.  They are expected to keep rates unchanged at 4.35% after the disappointing employment data recently, although I wouldn’t be surprised if RBA Gov Bullock offers a hawkish tone in her accompanying statement.  AUDUSD and AUDNZD are currently 0.7070 and 1.1990, GBPAUD 1.9090.

Have a great day…

-  00.01 UK BRC retail sales

-  05.30 RBA rate announcement

-  06.30 RBA press conference

Markets quiet ahead of nonfarm payrolls

Good morning

Equities were mixed and oil prices made gains yesterday as it emerged a deal between Iran and Oman over the Strait of Hormuz was not quite what was hoped, containing bans for US and Israeli ships among other conditions. It remains clear that we are a long way from getting a peace deal that Trump insists Iran is desperate for.  Indeed Trump is approaching the point where he either has to go all out against Iran or back down completely.  Meanwhile there are reports that Iranian backed militia may be preparing attacks on Saudi Arabia.

China trade numbers overnight showed a $112bn surplus, a little above expectations.  The US dollar is very slightly higher, GBP and EUR are currently 1.3450 and 1.1520 against USD, putting GBPEUR around 1.1670.  USDJPY has crept higher, reaching as high as 158.50 overnight, Ueda’s slightly more hawkish line ahead of September’s BoJ meeting having little impact on Yen.  Markets are of course still wary of further intervention but so far both Japan and US are staying quiet.  On the subject of intervention, it transpires that the ECB were not informed that US would be selling Euros to prop up the yen in recent intervention, something the ECB says is a contravention of central bank understanding.

The mildly stronger USD comes as yet another Fed official, this time Musalem, gave some hawkish comments along the lines of ‘inflation is too high, economy and labour market is resilient, favoured raising rates at recent FOMC meeting’.  Still, markets remained reasonably quiet ahead of today’s nonfarm payroll numbers.  Forecasts are for a headline around +80k and an unchanged unemployment rate of 4.2%. 

Not much on the sporting calendar over the weekend, which is good actually given that I have a load of work to catch up on in the garden which has been a bit neglected for a couple of weeks, no surprise given my recent raft of mini-breaks.  It’ll be a hot weekend, up in the 30’s on Sunday, so I’ll get as much done on Saturday as I can. 

Next week brings UK GDP, US CPI, PPI and retail sales, as well as the latest RBA rate announcement and RBNZ inflation expectations.  RBA are widely expected to leave rates unchanged next week.

Have a great day, and a great weekend as and when it comes…

-  13.30 US nonfarm payrolls

-  13.30 CAD employment

-  15.00 CAD Ivey PMI

Likely to be a quiet one ahead of tomorrows nonfarms

Good morning

Talks with Iran over the Strait of Hormuz seem to be ongoing and the lack of military attacks from both sides has led us to this period of improved risk sentiment.  Oil prices remain near the lows of recent ranges, heading towards the levels we saw in July before US reinstated the Iran port blockade and both US and Iran traded shots.  Iran and Oman are also reported to be close to a deal on management of the Strait of Hormuz, we await confirmation of any such agreement.

Equities remain firm although Asian markets overnight did lose a bit of ground.   The US dollar had a brief spell of weakness yesterday which saw GBPUSD trade up to 1.3485 and EURUSD to 1.1560, but as I type we are 2-025 pips off those levels which puts us pretty much exactly where we were this time yesterday.  Comments from Feds Kashkari that now is the time to start raising rates, in line with other more hawkish Fed commentary, offered little in the way of support for USD.

Aussie trade balance showed a surplus of AUD1.9bn overnight, reversing last months deficit which itself was revised to a smaller loss.  AUD hasn’t really reacted, with AUDNZD just a few points below 1.2000 and GBPAUD 1.9120, pretty much unchanged from this time yesterday after seeing a dip overnight to the 1.9065 area before the trade data was released.

USDJPY has traded between 157.20 and 157.95 for the last couple of days now, very much calmer after the intervention we saw last week and possibly earlier this week.  It is currently near the top of that range at 157.85.  Intervention tends to have a temporary effect and with BoJ rates still well below Fed rates I would not be at all surprised to see JPY weaken steadily.  Still, the threat of further intervention and potential BoJ rate rises could be enough to slow any yen depreciation, indeed I have seen a couple of major banks lowering their year-end yen targets for below 150. 

The SpaceX rocket did crash into the moon yesterday but so far we are still waiting for pictures and videos.  Not quite sure why they take so long, I’d have thought someone would have a video of the event.  I’ve seen a couple of videos on the internet but as with anything these days it is more likely to be produced by AI than anything reality-based.   It is getting more and more difficult to know what to believe these days. 

EU retail sales probably today’s highlight although it’s rarely market-moving.  Second tier US jobs data on the calendar but we await the main event, nonfarm payrolls tomorrow.  Not sure how that is going to play out, I’m tempted to look at an overnight strangle just in case we see some volatility, perhaps 1.34-1.35 strikes which is likely to cost 20-25 usd pips.  I can see it being a bit quiet today so no rush to get it on, could get a few pips cheaper into the afternoon.

Have a great day…

-  09.00 ECB economic bulletin

-  10.00 EU retail sales

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  22.30 Feds Musalem speaks

-  04.00 China trade balance