Spreadex Market Update
Weak NFP Report Drives Dollar and Equities Lower, ECB Hints at Continued Rate Hikes
The financial markets witnessed a decline in the dollar and US equities due to the disappointing Non-Farm Payrolls (NFP) report, raising concerns about the labour market and its implications for the Federal Reserve's outlook. While the weak NFP data affected investor confidence, ECB members reiterated the possibility of future rate hikes.
Key Factors for Today
- NFP misses expectations, denting investor confidence in the dollar and US equities.
- Disappointing jobs numbers weigh on the dollar, sparking speculation about potential Fed rate adjustments.
- Intervention fears push USD/JPY 1.40% lower, supplemented by the BOJ's repo operation.
- Euro gains strength amid a soft dollar and ECB's hike rhetoric, with focus on the $1.10 level.
- Weaker China CPI figures highlight economic headwinds and support an upside in gold prices.
Market Movers
- Non-Farm Payrolls (NFP) miss expectations, denting investor confidence in the dollar and US equities.
- Disappointing jobs numbers prompt speculation on potential Fed rate adjustments.
- Intervention fears push USD/JPY lower, while the BOJ repo operation adds to the decline.
- Euro gains strength on a soft dollar and ECB's hike rhetoric, with focus on the $1.10 level.
- Weaker China CPI figures suggest economic headwinds, influencing gold prices.
Economic Calendar
- Fed Barr Speech
- Fed Daly Speech
- Fed Mester Speech
- Fed Bostic Speech
- BoE Gov Bailey Speech
- BRC Retail Sales Monitor
- ES Consumer Confidence
The Big News
Dollar Slides on Disappointing Jobs Numbers
The NFP report revealed that the US added 209K jobs last month, falling short of the expected 230K. However, the unemployment rate ticked down to 3.6%, possibly due to rounding adjustments. Notably, April and May's job reports were revised lower by 110K, indicating a weaker labour market than initially reported. The increase in part-time workers further signalled potential weakness in hiring.
USD/JPY 1.40% Lower on Intervention Fears
Concerns of intervention by the Japanese government to bolster the yen arose as the yield on the US benchmark ten-year treasury surpassed 4.0%. Consequently, USD/JPY experienced a 1.40% decline on Friday, sliding from 144.00 to 142.00. Over the weekend, the Bank of Japan (BOJ) announced a new 1-trillion yen repo operation, further fuelling speculation of potential declines towards 140.00.
Euro Bolstered from Soft Dollar and ECB Hike Rhetoric
The Euro found support from a weakening dollar and the ECB's rhetoric on rate hikes. In an interview with La Provence, ECB President Christine Lagarde stated that the bank still had work to do to combat inflation, expecting the Consumer Price Index (CPI) to remain above the target well into 2025. Additionally, ECB Vice President Luis de Guindos emphasized that rate hikes were not off the table and the possibility of a September hike remained open.
Weaker China CPI Offers Gold Helping Hand
Weaker-than-expected China CPI figures added to concerns about the global economy. China's annual CPI change came in at 0.0% compared to the expected 0.2%, while the monthly CPI stood at -0.2%. The Producer Price Index (PPI) fell by -5.4% against an anticipated 5.0% increase. This marks the fifth consecutive month of inflation contraction, underscoring the headwinds faced by the world's second-largest economy. In response, the yuan weakened, shaking investor sentiment and adding to support for gold.
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