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  • richard evans

USD fails to hold gains after stronger US employment numbers

Good morning

 

A surprisingly high US nonfarms headline sent USD higher on Friday afternoon.  The headline of +303k was over 100k above expectations, while revisions to previous readings were small.  The unemployment rate ticked lower to 3.8% while average hourly earnings were unchanged at 4.1%.   GBPUSD traded from 1.2640 to 1.2575, EURUSD saw similar declines from 1.0850 to 1.0790 and it looked for an hour or two as though the US dollar would end the week on a firmer footing, particularly with the geopolitical risks looming over the weekend.

 

And then it all changed again.  By London close GBPUSD was back up to 1.2630 and EURUSD to 1.0840.  The move seemed to have been driven by a reduction in risk premium over the weekend, a surprising move but one that appears to have been borne out as Israel say they have moved all but one battalion out of southern Gaza and the two sides are in Egypt for more peace talks.  There is a glimmer of hope now although we do know the two sides are far apart in their demands.  Still, the movement of Israeli troops might be enough to put pressure on Hamas to a compromise of sorts.

 

The other safe haven currencies, CHF and JPY have also lost a little ground from their Friday highs.  EURCHF is now touching on 0.9800 while USDJPY is at 151.80, back near the key 152.00 area that some are suggesting may be a line in the sand for BoJ.  Oil prices opened lower, Brent is now below $90 having been near $92 Friday, WTI is in the mid $85s having been around $87.50 last week. 

 

The only ‘safe haven’ that hasn’t lost much ground is Gold.  It traded to $2,350 overnight and while it is off those highs at $2,335, it is still above last weeks levels.  Reports that China are continuing to add to their gold reserves is surely offering support to the metal, they now hold nearly 73million oz having purchased 160k oz last month.  I remember some years ago, 2010 I reckon, China rans ads on TV urging its citizens to buy gold, I wonder how many of them did so.   With gold prices then around $1,200, they’ll all be wishing they had done.  So do I. 

 

As a reminder though that the world remains in a dangerous place, there are reports that the Zaporizhzhia nuclear plant was hit by a drone attack with Russia accusing Ukraine of the attack, Ukraine of course denying any involvement. 

 

Todays calendar looks sparse and tomorrow’s is even lighter, however things hot up Wednesday with the release of the latest US CPI inflation numbers.  We are running out of time for the softening of data that is perhaps required to have a rate cut from the Fed by June.  That release is certainly the highlight of the week but we also have ECB, RBNZ and BoC rate announcements, german inflation, UK GDP and the US Michigan sentiment survey.  Could get interesting later in the week.

 

In other news, I have to say I feel a little sorry for a chap called Russ Cook, who has spent the last year raising money by running more than 10,000 miles, or approximately 385 marathons, from the southern-most point in South Africa to Tunisia in north Africa.  He has battled through sandstorms, illness, armed robbery, and many other life-threatening situations.  He has raised as admirable £700,000, anyone who raises that amount of month should be held in very high esteem, although I have to say that if I were him I’d be a bit disappointed to see Captain Tom raised £39m by walking round his garden.  I feel sorry that Mr Cook’s adventures did not receive more publicity which would have helped him raise a more appropriate sum of money.

 

In sport, Spurs have moved into fourth place in the premier league with a win over Forest.  All looking good until you look at Spurs seven remaining matches which includes all of the top three teams.  It’ll be a touch end to the season. Arsenal meanwhile moved top with a win against Brighton, while title rivals Liverpool could only manage a draw against Man Utd.  We’re going to get to a stage soon where Arsenal fans are going to find themselves cheering for Spurs!  Attention this week turns to European football with quarter finals of the Champions league starting Tuesday.

 

We were treated to some lovely warm, sunny weather over the weekend although it was a bit too blustery to feel too hot.  It gave us a reminder of what we are missing, and a peek at the forecast over the next couple of weeks suggests temperatures will still be lower than we’d like and there are still far too many raindrops on the coming days.  It has to get better at some point.  Maybe we’re just going to have a glorious summer!

 

Enjoy the day.  People on some parts of the world will be treated to a solar eclipse, it pretty much misses the UK although those in the West may see a tiny bit of moon moving over the sun.  For the rest of us we’re really just hoping for no rain.

 

-  16.15 SNBs Jordan speaks

-  23.00 NZ business confidence

-  00.00 Feds Kashkari speaks

-  00.01 UK BRC retail sales

-  01.30 AUS Westpac consumer confidence

 

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