Markets:
- Gold up $33 to $2,323
- WTI crude oil up 14 cents to $86.73
- US 10-year yields up 8.1 basis points to 4.39%
- S&P 500 up 57 points to 5204
- USD Leads, CAD Lags
At the end of the day, currency changes are minimal, but that doesn’t tell the whole story.
The US dollar jumped 40-50 pips in the non-farm payrolls report as the data and details were extremely hot. The only thing that kept the unemployment rate down was an increase in the participation rate. Salaries would also have been higher without some rounding and a revision of the precedent.
Despite this, stock futures held in positive territory and that was a sign of things to come. The oddity is that yesterday there was a rout in risk trading late in the day due to war fears in the Middle East and that has started to ease. With that, the dollar ended up giving back all of its NFP gains and stocks roared.
The Fed’s speech has not been lacking and it has certainly been more hawkish, but the market still remains dependent on data. The Fed’s June odds have fallen to almost 50% and cuts of 65 basis points are expected this year, down from 70 before the data. Bonds also took a beating late in an event to watch for the week ahead, especially with CPI on deck.
Perhaps, however, the market is looking overseas, where government spending is lower and inflation is returning to target (or lower). The Bank of Italy cut its inflation forecast today and employment in Canada was surprisingly weak. The US appears to be more of an exception, meaning that once fiscal stimulus dries up, outperformance will also decline. In the short term, this should be a tailwind for the dollar, but this will eventually reverse as the bill is paid.
As for the loonie, it fell to its worst levels of the year before rebounding later amid the widespread fall of the dollar and with the help of new highs for oil.
cnbctv18-forexlive
