Good morning
US nonfarm employment numbers Friday were considerably worse than expected, Not only was the headline of +114k well down on the 175k the market was looking for, the previous reading was revised lower, the average earning rate dipped to 3.6% and the unemployment rate ticked up surprisingly to 4.3% from an expected 4.1%. Not a great set of numbers and one that has the market talking of possible recessions and hard landings, and now the idea of a Fed rate cut of 50bps in September looks far more likely.
This did lead to USD weakness, at least initially, with GBPUSD trading up from 1.2745 to 1.2840, and EURUSD reaching as high as 1.0940. By the US close both were just off those highs, this morning however while EURUSD is up at 1.0940 we have seen we were back down at 1.2800 and this morning we have seen GBP selling which has seen a low in GBPUSD 1.2715 as low as 1.2715 and GBPEUR down to 1.1660, the lowest level since May. Both are just off those lows as I type but it is clear GBP is remaining soft after last weeks rate cut. I’m not sure what impact the weekend riots have had but the growing unrest within factions of the population cannot be helping.
Yen has seen big moves. USDJPY was trading up at 149.00 ahead of the US employment numbers, as I type it is just below 143.00, quite a substantial drop and with GBP weakness and Yen strength, GBPJPY is down at 182.60, but has been to almost 180.00 this morning. Why? Well there is increased talk of the need for further BoJ rate rises, but taking a look at Japanese equities we can see where the real problem lies. The Nikkei and Topix are each down over 12% today. Futures pricing this morning suggests Western indices will be trading sharply lower. Risk sentiment is now only waning, it is disappearing.
AUD is another than has seen big moves this morning. AUDUSD had been around 0.6500 but fell to around 0.6350, GBPAUD traded from 1.9700 to over 2.0000 and AUDNZD dipped to 1.0850. We do have the latest RBA rates announcement early tomorrow morning, there had previously been calls for higher rates but it would seem that talk of rate rises has been clearly replaced with no change and a possible open door to lower rates in early 2025. Another factor in AUD weakness could well be that Australia raised their terror threat level to ‘probable’ from ‘possible’.
Not helping the global risk sentiment is the concerns that we will see retaliation by Iran and/or Lebanon for recent attacks by Israel. The US are sending additional warships and aircraft to the region, partly in a show of strength but also to provide some defence for Israel if required. The world is not a great place at the moment.
Still, there are beacons of light. The Olympics are going strong and there have been some pretty exceptional performances including the mens 100 metre final yesterday which saw an incredibly close finish in a race where every competitor ran under ten seconds. Mens 400m hurdles this morning, then some speed climbing later in the day which, if you haven’t seen it, is worth a watch as climbers seem to defy gravity with the speed of their climbing. Honestly, if you laid the wall down flat, I don’t think you could crawl across it in the time they can climb it.
An interesting weekend for me, it was my daughters birthday and we headed to London to do a treasure hunt type thing which was like an escape room but out on the streets, I really don’t want to say too much for fear of messing it up for you but will say that on a couple of occasions we had to go into a pub, up to the bar, and say to the bar staff ‘Moneypenny sent me’ and we then got handed a briefcase with codes to crack. Pretty fun, some tough bits in it but we got through it in the end. I’d recommend.
What wasn’t quite as fun was the fact our car was stolen at the weekend. I was out but quick work from my youngest son who was at home at the time got the police out on the streets and the car was found about a mile from my house, and a couple of hours later was back in my drive. We then found a tracker placed in the car by the thieves, apparently it is normal practice for them to steal a car, dump it not far away, and then go back to it a day or two later if it is still there. It removes the risks of them being in a car with a tracker apparently. Anyway, I’d been trying to sell the car and it would seem that someone who came round to see it had cloned the key. Apparently having failed once they won’t try again. We’ll see.
So, back to work. Last week had all the event risk but we’ve seen the bigger moves already this morning. Keeps us on our toes, that’s for sure. Watch US PMI and ISM today, more weak readings could send that risk sentiment lower still.
Have a great day
- 09.00 EU composite PMI
- 10.00 EU PPI
- 14.45 US S&P composite PMI
- 15.00 US services ISM
- 22.00 Feds Daly speaks
- 00.01 UK BRC retail sales
- 05.30 RBA rate announcement
- 06.30 RBA press conference
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