USD ends the week lower despite reasonable nonfarm headline

Good morning

I hope you had a good weekend and were not too badly affected by the storms.  We got away with it although I have to say I don’t remember a time when a storm lasted so long with such ferocity.  We seem to have had more than our fair share of storms recently I’d say, the coming week looks as though it will be more settled but likely on the chilly side. 

In contrast, the US nonfarm payrolls came in pretty hot Friday with a headline of +227k, plus an upward revision to previous readings.  The average hourly earnings number came in stronger than expected albeit the same as last month, although the unemployment rate did tick up to 4.2% from 4.1%.  Overall not a bad set of data but it was not enough to stop the US dollar moving lower, initially at least, with GBPUSD trading up to 1.2810 and EURUSD to 1.0625.

Those moves, which I have to say came as a bit of a surprise, soon reversed, sending GBPUSD and EURUSD lower to 1.2720 1.0540, helped by some reasonably hawkish comments from Fed officials who in general certainly seemed to prefer a gradual approach to rate cuts, Bowman warning that cutting rates too quickly could reignite inflation.  Only Goolsbee sounded too a more dovish tone, continuing to see much lower rates through 2025 although even he agreed that the pace of cuts would have to slow next year. 

This morning we’ve already seen a bit of two-way action, both GBPUSD and EURUSD initially traded lower but are now off those lows at 1.2765 and  1.0565 respectively.  GBP remains strong vs EUR, now in the high 1.20s, almost equalling the highs we have seen so far this month, just short of 1.2100.

Friday also saw Canadian jobs data, a bit of a mixed bag with a better than expected net employment change but a higher unemployment rate, which makes a 50bps cut by BoC on Wednesday all the more likely.  CAD is lower, USDCAD is 1.4170, GBPCAD up at levels not seen since the end of October, around 1.8060.   

Gold has been reasonably stable recently despite the various geopolitical issues around the world.  The news that China added to its gold reserves after some months of inaction helps see gold at the higher end of recent ranges, now US$2,645.  China now hold 72.96 million ounces, up from 72.8 million, having probably used the recent dip to $2,540 to add to their holdings.  This may not send gold higher but I’d imagine China would still have interest to buy on dips, which should see gold prices supported. 

Elsewhere in the world, USDKRW spiked again to reach a high of 1,438 overnight, the political turmoil is far from over following the attempted introduction of martial law last week.  In Syria, rebel forces have ousted Assad who has retreated to Moscow.  I’m still unclear as to whether this is good, I mentioned the other day that I thought Assad used to be on ‘our’ side, while some those who now seem to be in control of Syria could well have originated from ISIS.  The US have conducted large scale airstrikes on ISIS targets in Syria in the hope it prevents a resurgence of the terror group.  Let us not forget though that Russia supported Assad and there must be concern that US and Russian forces could, at some stage, meet in conflict in the region.

Notre Dame has reopened after five years of reconstruction following the devastating fire back in 2019.  It is worth noting that Hammersmith bridge, which was closed to vehicles around the same time as the Notre Dame tragedy, remains closed and looks set to be shut for another five years.  Pretty shocking that this is not a priority and I fail to understand just how it can take so long, and so much money, to repair.  Latest estimates are for a bill of some £250 million but we all know it would probably end up being nearer £1 billion.

So, in sport, Spurs put on a rather typical performance against Chelsea, losing 4-3 after letting a two goal lead slip, helped in no small part by two naïve, unnecessary and frankly ridiculous tackles that handed Chelsea two penalties.  Chelsea look good mind you and deserve their second place in the league table after Arsenal could only manage a draw against Fulham. 

In cricket, England won the second test against New Zealand by a large 323 runs, bowling out the hosts for 259 after having declared in their second innings at 427/6.  Next test starts on Friday.

In Formula One, congratulations to McLaren for winning the constructors championship, in doing so becoming the first team outside of Red Bull and Mercedes to win the title since 2009.  It was close, Ferrari were just fourteen pints behind McLaren on 652 points, while Red Bull were third with 589.  That’s it for the season now, the next season starts on 16th March in Australia. 

Another major contest was decided over the weekend.  Yes, the finals of I’m a Celebrity saw McFly’s Danny Jones winning the crown.  He’d been the favourite since the start and had been pleasant all the way through but by the end of it, for me Coleen Rooney would have been a more worthy winner.  

Right, back to work.  Not a lot on the calendar today but plenty coming up through the rest of the week, including rate announcement from ECB, BoC and SNB.  We also have inflation data from US and Germany, and Aussie employment numbers.  We start overnight with the latest rate announcement from RBA.  They are widely expected to keep rates unchanged at 4.35%, it will be the tone of the accompanying statement that will be of more interest.  For now, GBPAUD is 1.9820 having been just 25 pips short of 2.0000 last Friday.

Wow, that all went on a bit.  I’ll leave it there for now, have a great day

-  13.00 BoEs Ramsden speaks

-  03.00 China trade balance

-  03.30 RBA rate announcement

-  04.30 RBA press conference

-  07.00 German HICP

Markets wait for US nonfarms for clues as to FOMC cuts later this month

Good morning

USD continues to show signs of weakness as it has done for much of the week already, albeit gradually.  This time it was slightly worse initial jobless claims and challenger job cuts data yesterday afternoon that helped the USD lower.  GBPUSD reached a high of 1.2770 this morning, the highest since 12th Nov, and EURUSD touched just a few pips short of 1.0600 pretty much matching the high since 20th Nov. 

This USD weakness comes ahead of the long-awaited US nonfarms today.  We’re looking for a headline well up from last month’s weather-affected +12k, something in the region of +200k, but there is a chance the unemployment rate will tick up to 4.2%.  A slightly lower average hourly earnings figure is also expected, if any of these elements do come in on the softer side I’m sure we’ll see increased calls for a 50bps FOMC cut in a couple of weeks.

GBOP has made gains against USD this week and also holds up well against EUR, GBPEUR now 1.2065, not a huge surprise given the French turmoil.  However I see the CBI has lowered UK growth forecasts for 2024 and 2025 to 0.9% and 1.6%, from 1% and 1.9%, citing measures in  Reeves budget that will squeeze business.  

Macron addressed the French nation yesterday evening after the collapse of the French government after the confidence vote which Macron called ‘unprecedented’, the first time a French government has been voted down for some sixty years.  He thanked Barnier for his three months of service and vowed to find a new PM in the coming days.  He has blamed far right and far left collaboration for the government downfall.  I wonder If Macron is ruing his decision to hold a snap election. 

RBI did keep rates on hold earlier this morning in a 4-2 vote, confirming that the move to neutral rates does not mean immediate rate cuts.  RBI have to deal with a difficult combination of lower growth and rising inflation, for now looking for to the latter.  RBI did surprise with a 50bps cut to the reserve cash ratio to 4%.  Overall, after a bit of volatility, USDINR settled around 84.65, with GBPINR up just above 108 now.

In Korea, reports of another attempt at imposing martial law sent USDKRW up from 1,415 to 1,429 but the move was short-lived as Korean military leaders played down those suggestions.  Still talk that President Yoon will face an impeachment vote tomorrow.

Meanwhile commodity currencies such as AUD, NZD and CAD have all lost ground against GBP, now 1.9855, 2.1800 and 1.7910 respectively, with AUD and NZD now both around the highs seen back in October. 

Yesterday evening Spurs disappointed once again with a loss to Bournemouth which sees Spurs slip to mid-table after only two wins in their last six league matches.  Worrying, particularly as we’ve got high-flying and in-form Chelsea on Sunday.  That could be the highlight of the weekend fixtures although Man Utd v Notts Forest will be intriguing, both looking to bounce back from recent defeats.

In cricket, England looked they had performed badly with a first innings of 280 all-out, although it wasn;t a bad comeback from 43/4 at one stage.  New Zealand were a sorry 86/5 at the close, England will be looking to turn the screws over the weekend.    

Once we have nonfarms out of the way, and hear from a few more Fed officials, we can look forward to the weekend but we are far from being able to settle into the Christmas spirit just yet.  Next week brings rate announcement from ECB, RBA, BoC and SNB.  We also have inflation data from US and Germany, and Aussie employment numbers.  The following week isn’t much better, with BoE and FOMC rate meetings.  No rest for the ‘wicked’.

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

-  10.00 EU GDP, employment change

-  13.30 US nonfarm payrolls

-  13.30 CAD unemployment

-  14.15 Feds Bowman speaks

-  15.00 US Michigan sentiment survey

-  15.30 Feds Goolsbee speaks

-  17.00 Feds Hammack speaks

-  18.00 Feds Daly speaks

What a 'wicked' evening

Good morning

Weaker US ADP numbers and a revision lower to the previous months reading, as well as a weaker ISM services PMI number, sent USD lower yesterday afternoon and although there was a bit of a USD recovery ino the evening, we have seen further USD selling this morning which take GBPUSD to 1.2735 and EURUSD to 1.0540. 

GBP remains strong against EUR, GBPEUR is currently at 1.2080 but I have to say I am surprised we didn’t see a strong EUR reaction to the collapse of the French government.  Macron will now have to find a new PM but I don’t see how anyone could satisfy the French parliament, divided as it is.  Macron speaks later this evening.  

USDJPY has been chopped around this week, having hit a low around 148.65 on Tuesday it rallied back to 151.20 yesterday, only to fall back below 150.00 this morning, so far reaching a low of 149.65.  GBPJPY is around 191.00 after seeing lows on Tuesday just above 188.00.  The latest bout of yen strength this morning has been put down to reasonably neutral comments from BoJs Nakamura, who is usually on the more dovish side.  He said he sees signs of an economic recovery and even went so far as to say he wouldn’t necessarily oppose a rate rise if data allows.

Both Fed and ECB officials, including Powell and Lagarde, have been talking about patience and preferring to cut rates cautiously, suggesting any rate cuts in December are likely to be 25bps or perhaps even smaller, although there are still some pretty big US banks still looking for a 50bps cut from the Fed this moth, followed by four 25bps cuts through 2025.  This weeks nonfarms and next weeks US inflation numbers will be key for the Fed decision. 

Bitcoin has broken through the US$100,000 level, reaching a higher around $103,500, after Trump appointed Paul Atkins to head the US financial regulator, the SEC.  Atkins is expected to be a bit more pro-crypto, hence the rally. 

RBI rate announcement is due in the early hours of tomorrow morning.  We have had some decent volatility in GBPINR over the past couple of months.  October GBPINR was around 112.00, falling to 105.50 towards the end of November but has since recovered to almost 108.00.  Much of this move is downto GBP volatility mind you.  Over a similar period we’ve actually seen USDINR gradually tick higher from 83.50 to current levels around 84.71.  Rates are expected to be unchanged at 6.5%. 

In football, both Chelsea and Arsenal won last night, closing the gap on Liverpool who could only manage a draw, while Man City got their first win in five premier league matches with a solid win over Notts Forest.   Spurs play Bournemouth this evening, one of those important matches for Spurs where a win could put them into the top five, while a loss would see Bournemouth move from 13th to 8th, above Spurs in the table.  Spurs form has been far too mixed for me to have much confidence.

I missed the football yesterday evening as, at last, I got to see Wicked at the cinema.  So, what did I think?  Overall, it was pretty good, helped by the fact I do know the soundtrack pretty well.  It is long but actually time went quite quickly.  This one finished where the interval for the theatre show comes in which leaves the door open for part two which I believe comes out around this time next year.  Overall a decent watch and being so long it actually spends a bit more time on some of the important story parts that the theatre show skips over.  I’d still take the live performance mind you, but this was not disappointing at all.  

Have a great day

-  10.00 EU retail sales

-  12.30 US challenger job cuts

-  15.00 CAD Ivey PMI

-  17.00 BoEs Greene speaks

-  19.00 Macron speaks

-  04.30 RBI rate announcement