Big moves in Yen, now waiting for US nonfarm payrolls
Good morning
Welcome to 4th September, a day that is special to me only because on this day back in 1989 I started my first job in the world financial hub, the City of London. OK, it was a pretty dreary admin role but who’d have thought I’d be here, some thirty seven years later, co-owning a fully regulated financial firm of my own. Well, when I set out, I probably imagined I’d have my feet up on a desert island somewhere by now, but it’s fair to say that both Mark and I still greatly enjoy helping our customers be as efficient and effective in managing their currency exposures, so why would we want to give it all up? As long as our customers want us, we’ll be here.
US ISM and S&P PMI’s yesterday beat expectations while the lesser-watched Challenger job cut number came in at 53k, well above last month’s very low reading of 33k, but still well above May’s terrible 97k which was the highest May reading since Covid in 2020. However the US dollar found little in the way of support, mildly dovish comments from Feds Williams didn’t help but perhaps it was also continued pressure through the day from USDJPY selling that finally saw the US dollar lose a bit of ground against other majors.
USDJPY hit a low around 155.30, within a few pips of the low after the July intervention and pretty much 500 pips from the Wednesday high. That is quite a move but one that, although quick, has been more orderly and steady that July’s sharp decline. This move seems to be more down to Yen strength as a result of increasing BoJ rate rise thinking and possible repatriation rather than simple intervention. Indeed, the limited knock-on effect on other majors suggests this is more of a Yen move than outright USD selling.
EURUSD hit 1.1640 in afternoon trading while GBPUSD pushed up to a high of 1.3545, up from a Wednesday low around 1.3475. GBP had dropped to 1.1615 but managed a slight recovery to 1.1645 into the London close. In the crosses, no surprise at all that GBPJPY traded to within a few pips of 210 given the Yen move. Against AUD, NZD and CAD, GBP is currently at 1.8800, 2.3000 and 1.8690.
US nonfarms are without doubt the main event today, looking for a headline around +56k after July’s miserable -23k reading, while the unemployment rate is expected to hold around 4.1%. Usual rules apply, a stronger reading is likely to cement thoughts of a rate rise and send USD higher, while another negative headline could dent those rate rise ideas.
Canada’s employment numbers are out at the same time but will be overshadowed by the US numbers for everyone other than the most ardent CAD watchers. For the record UDSCAD is 1.3795, much lower than Wednesday’s high near 1.3940, CAD taking good advantage of the softer US dollar. Given both US and Canadian employment data is out today, perhaps its worth looking at a Monday expiry 1.3775-1.3825 strangle which costs around 25 cad pips.
In sport, it’s another South Africa v New Zealand rugby match, the third in a series of four tests, which should be another bruising encounter. With scores level at 1-1, both teams will be hoping for a victory which they could carry into the fourth match knowing they could not lose the series. A new trophy has been designed for the series, it’s pretty decent in that it splits in half in the event of a drawn series. We also have the Italian F1 grand prix on Sunday.
In terms of football, Spurs will visit Notts Forest where they’ll hope to finally get some points but I’m not holding my breath. Some interesting matches over the weekend including Newcastle v Bournemouth and Hull, unbeaten so far, against Aston Villa. The highlight is likely to be Arsenal v Chelsea on Sunday, both teams unbeaten so far. In other football news, I saw an incredible statistics this morning…there is currently not a single Italian player in Seria A that has played a world cup match. Pretty amazing.
Next week brings EU and Japan GDP, China trade balance, and US inflation with PPI on Thursday and CPI Friday. We’ll also have the ECB rate announcement where a 25bps rise is widely expected. Before then we have the weekend which looks like it could be reasonably warm and sunny despite things looking a bit dreary this morning. I’ll have to get out in the garden for a general tidy up although I do have a couple of family functions which might make my thoughts of garden work tricky. Oh well, never mind!
- 09.50 BoEs Bailey speaks
- 10.00 EU retail sales
- 10.00 ECBs Lane speaks
- 13.30 US nonfarm payrolls
- 13.30 CAD employment
- 15.00 CAD Ivey PMI
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