By Kymberly Martin
US payrolls data inspired volatility early Saturday morning.
But overall the EUR was a little weaker and the GBP outperformed on the UK election results.
On Friday night, the headline US payrolls number came in close to expectations.
However, it was the subdued hourly earnings number (0.1%m/m) that seemed to capture the market’s attention, along with downward revision to the previous month’s payrolls number.
It proved a ‘Goldilocks’ report for the markets. Not too hot to suggest an imminent rate hike.
A June hike is now clearly off the table, though we stick with our pick for a Sept hike.
It was also not too cold to suggest Q1 growth softness is gaining negative momentum in Q2. Consequently, the data supported both bond and equity performance.
There was significant volatility in currency markets immediately after the release.
Subsequently, many currencies, including the USD, were little changed.
Overall the EUR was a little weaker on the day, ending the week at 1.1200.
While Greek negotiations grind on, German finance minister Schaeuble warned of countries that suddenly find themselves unable to pay their debts. However, he restated commitment to keeping Greece in the Euro, saying “If it fails, it won’t be because of us”.
It was the GBP that stole the show on Friday. Against widely held expectations for a highly uncertain election outcome, the GBP gapped higher as exit polls showed Conservatives would win the highest number of seats. It had another spurt higher later in the night as news suggested the party would secure an outright majority (which later proved the case). From 1.5200 on Friday morning, the GBP/USD touched highs above 1.5520 post-election. It later drifted off to end the week at 1.5450. Tonight, the Bank of England will announce rates, though no change is expected.
The AUD suffered volatility around the US payrolls release but ended the week fractionally higher at 0.7930. Friday’s CFTC speculative FX data showed positioning in the AUD has flipped to a small long for the first time since Sept last year (+0.6k from -24.7k).
Over the weekend, the People’s Bank of China cut interest rates for the third time in six months. This show of commitment in supporting the economy will likely help support AUD and NZD this morning.
NZD/USD closed a little higher on Friday night. The currency had bumbled sideways for most of the day in the absence of domestic data releases.
It endured some choppy trading after the release of the US payrolls data but ultimately came out on top, to end the week at 0.7490. Near-term support remains at 0.7420 while resistance is eyed around 0.7530.
There was a notable step-shift lower in the NZD/GBP on Friday morning, as the Conservatives took the lead in the election exit polls. However the cross found support at the very strong technical level just below 0.4800. It has subsequently returned to trade at 0.4850.
Meanwhile the NZD/AUD and NZD/EUR have both bounced after their recent sharp falls. The NZD/AUD ended the week at 0.9440. We see the cross trading a fairly wide range in the mid-90s through to year-end.
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