NFP Misses Expectations, Earnings Propel Markets Higher

In a twist of market dynamics, non-farm payrolls in the US fell short of predictions, but an impressive surge in corporate earnings buoyed equities, resulting in a mixed sentiment across global financial arenas.

Key Factors for Today

• US non-farm payrolls disappoint, posing challenges for the Federal Reserve's outlook
• Canadian economy grapples with job losses and sluggish PMI data
• Bank of Japan emphasizes commitment to accommodative policy
• OPEC+ maintains current output targets as WTI crude oil continues its ascent

Market Movers

• US yields take a dip post-NFP, contributing to a wider yield inversion and a weaker dollar
• Equities defy early losses, ending the day on a higher note despite mixed economic signals

Economic Calendar

• German Industrial Production MoM
• Halifax House Price Index MoM
• Mexican Consumer Confidence
• Fed Bowman Speech
• BRC Retail Sales Monitor YoY
• Japan Current Account
• Spanish Consumer Confidence

The Big News

A Tale of Divergence: NFP and Earnings Influence Markets

Non-farm payrolls in the US stumbled, reporting 187K jobs, notably below the anticipated 209K figure. The previous month's numbers were revised downward to 185K, spotlighting a concerning trend. While the unemployment rate dipped slightly to 3.5%, indicating relative job stability, the unexpected hero emerged in the form of average hourly earnings. Exceeding predictions at 0.4%, this statistic suggested the labour market retained its tightness, nudging towards potential Federal Reserve intervention.

This perplexing mix of data muddied the waters for market analysts, leaving the currency index DXY weakened. As a consequence, EUR/USD made a triumphant return above $1.10, with prospects of pushing towards $1.1045. However, a vulnerable $1.0965 level could usher in bearish pressure targeting the pivotal $1.09 threshold.

On the Canadian front, employment data painted a gloomy picture. A loss of 6.4K jobs in July diverged drastically from the anticipated 20K gain, leading to a higher unemployment rate at 5.5%. Simultaneously, Canada's Ivey PMI plunged into contraction territory at 48.6, defying expectations of 49.7. This dismay for the loonie paved the way for a four-day winning streak for USD/CAD, reaching $1.3380. Traders now anticipate a potential upswing to $1.3450 upon breaching $1.34 or a retreat to $1.33 if resistance persists.

Bank of Japan's Resolute Stand on Policy

The Bank of Japan (BOJ) sent a clear message through its summary of opinions (SoO) from the July meeting—sustaining the easing profile remained paramount. The BOJ's strategy embraced flexibility, allowing long-term interest rates to respond to market dynamics while steadfastly adhering to an ultra-accommodative rate policy. The aftermath saw USD/JPY testing ¥141.50, marking a two-day descent with ¥140.00 appearing within closer reach. Bulls could counter this trend by recapturing ¥142.50, potentially propelling the pair towards ¥143.32.

OPEC+ Holds Steady Amid Crude Rally

OPEC's Joint Ministerial Monitoring Committee (JMMC) opted to keep existing output targets unchanged, further consolidating the bloc's supply management approach. Saudi Arabia's extension of voluntary cuts added a layer of certainty to this decision. Notably, WTI crude oil surged to a four-month pinnacle of $82.60 per barrel, spurred on by the US weekly Baker Hughes rig count's decline. While resistance is projected near $83.50 and $84.20 per barrel, a solid support floor emerges at $79.70 per barrel.