Spreadex Market Update

USD Breaks Out To Fresh Highs Ahead of NFP



Today’s the big day. The release of the US non-famr payrolls is what traders have been waiting for all week and expectations are running high.
Ahead of the release, the US Dollar broke out to further highs yesterday (highest DXY levels since June 2002), boosted by better-than-expected ISM manufacturing data. On the back of hawkish comments from Fed’s Williams and Mester, traders are looking ahead to a further 75bps hike from the Fed this month and it would likely take a significant downside surprise in today’s reports to put any dent in those expectations.
In terms of the numbers, the market is looking for NFP at 295k from 528k previous, average hourly earnings of 0.4% from 0.5% prior and the unemployment rate to remain unchanged at 3.5%.
Key Factors for Today
- USD broke out to fresh highs yesterday, driven by better data and hawkish Fed comments
- Equities plunge on central bank tightening expectations, rising bond yields, inflation fears
- USD & CHF lead in FX – CAD weaker on lower oil prices
- Metals and oil holding at lows following earlier losses
Coming Up
- USD US unemployment rate
- USD US NFP
- USD US Average hourly earnings
Equities Hit Hard by Fresh USD Rally
Yesterday’s breakout rally in the dollar has seen equities prices plummeting across the board. Heavy losses were seen in US, Asian, European and UK stocks alike as central bank tightening expectations alongside rampant inflation fed into growth fears.
With a slew of central bank meetings next week, the near-term landscape looks precarious for equity markets with only a shift in the inflation/tightening narrative likely to help stocks recover. Today’s US data has the potential to drive further volatility in equities if we see USD moving higher on the back of the releases.
USD Leads in FX, Risk Currencies Sink
In FX, a stronger US Dollar has taken over the landscape into the end of the week. Risk-linked currencies have suffered as a result of the broader wave of risk-aversion across markets. CAD has been hit by the drop in oil prices this week in particular. One interesting feature of the current market landscape is that JPY has seen the weakest safe-haven inflows of USD, CHF and JPY. Likely a function of the BOJ’s continued commitment to easing, deepening the divergence with other central banks in the G10.
Metals & Oil Both Lower
In the metals and commodities space, gold prices are sitting just above the YTD lows for now. Silver prices have stabilised also, following a breakdown to fresh 2022 lows earlier this week, reflecting the softer start for the US Dollar today.
Oil prices too are clinging to their YTD lows following the reversal lower this week. The market was unmoved by the EIA drawdown reported on Wednesday with traders instead focusing on the upcoming OPEC meeting, rising bond yields and growing recessionary risks.

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