Trading volatile ahead of key US jobs report; few redeeming features in US labour data; imminent Fed rate hikes look unlikely; CAD & NOK firm on rising oil prices

By Kymberly Martin

The USD gapped lower against most peers early on Sat morning after a disappointing US payrolls report. The NZD/USD was a beneficiary, ending the week at 0.6430.

Friday night was all about the US payrolls report. Ahead off this, trading in most currencies had been fairly orderly, with the USD in the ascendancy.

Then the labour market report was delivered with few redeeming features. Whilst the headline non-farm number was well below expectation (142k vs. 201k) both July and August data were also revised down.

The unemployment rate held steady at 5.1%. But this was largely due to a participation rate that dropped by two tenths to 62.4%. Average hourly earnings were also flat on the month, remaining at 2.2%y/y (2.4% expected). An imminent Fed hike now seems unlikely.

The USD index promptly gapped more than a percent lower as the EUR was spurred higher. The USD remained battered until after soft US factory orders data was delivered. It then managed to crawl its way off its lows, to end the week only around 0.45% below its pre-payrolls level, at 95.90.

Overall on Friday, the CAD and NOK were the strongest performers assisted by the weak USD and a broad rebound in commodities, including a 1.8% rise in the WTI oil price.

But the NZD was not too far behind, holding onto a 0.5% gain against the USD on Friday.

Trading was very volatile around the release of the US payrolls report. Initially the NZD/USD was catapulted higher from 0.6400 to above 0.6450. However, the move initially proved short-lived.

The NZD/USD soon slumped back to its previous level, before later making a more enduring trek higher. It has opened this morning at 0.6460, attempting to break out of its trading range of the past six weeks.

If successful, the next area of resistance will be encountered just above the 0.6500 level.

The AUD also traded a rocky path on Friday. It made early-afternoon highs after the release of a solid AU Aug retail sales report.

However, this level was then exceeded early-Sat morning after the US payrolls report induced a spike in the AUD/USD toward 0.7070. This failed and the AUD/USD soon found itself back toward 0.7000. We open this week back near 0.7060.

The early-week focus for the AUD will be the RBA’s meeting tomorrow. No change in the cash rate is expected but the market may get some sense if it is justified in pricing around 40bps of further cuts from the Bank in this cycle.

Tonight, the Eurozone retail sales report and a swathe of Services PMI data will likely capture some attention.


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Daily exchange rates

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Kymberly Martin is on the BNZ Research team. All its research is available here.