Spreadex Market Update
Dollar Rallies Following Better-Than-Expected June NFP
The US Dollar begins the new week on the front foot with broad-based gains against its major trading counterparts on Monday. Friday’s jobs data was seen coming in well above forecasts at 372k vs 260k expected, with the unemployment rate and average hourly earnings both remaining unchanged at 3.6% and 0.3% respectively.
This latest data is likely the final piece of confirmation needed for traders eyeing a larger 75bps hike this month. Additionally, with the labour market still in good strength, pricing for September is remaining hawkish also.
Key Factors for Today
- USD rallies following strong US jobs data on Friday
- Risk sentiment rocked by fresh USD strength, China COVID fears
- USD leads in FX, risk currencies fall
- JPY lower as BOJ reaffirms easing bias, BOE’s Bailey to speak today
- Gold and silver hold near lows
- Crude futures correcting lower
Coming Up
- GBP BOE governor Bailey speaks
- EUR Eurogroup meetings
- USD Fed’s Williams speaks
Risk Sentiment Weakens On Post-NFP USD Rally
Investor risk appetite is taking a knock across the European open on Monday. With the US Dollar surging back to highs, equities markets are correcting sharply. Friday’s jobs data, while a good indication of the resilience of the US economy, has added to hawkish Fed expectations and is therefore weighing on asset markets.
Fears of fresh lockdowns in China are also having a downside impact today. The country is undertaking mass testing as cases there soar, only a few months after Shanghai was released from lockdown. A quiet data-sheet today means market moves are likely to remain tied to Dollar flows.
USD Leads the Way in FX, Risk Currencies Falter
In FX, USD has raced back into pole-position, with USDJPY hitting its highest levels in 24 years. Risk currencies are on the back-foot today with AUD and NZD suffering against the Dollar.
JPY has been hit also by comments overnight from BOJ’s Kuroda who reaffirmed the BOJ’s commitment to maintaining ultra-loose monetary policy. However, Kuroda did say that while there are clear weaknesses in the Japanese economy, the trend is moving upward. Looking ahead today, BOE’s Bailey will speak, with traders keen to get a sense of how the BOE is likely to act at the next meeting, while Fed’s Williams will also speak.
Gold & Silver Pause Near Lows
Both gold and silver are still sitting at the lows of the recent decline. However, despite the move higher in USD today, neither metal has broken lower, though both are vulnerable to such a move if USD continues to gain upside momentum. It’s likely that downside in risk sentiment is having some offsetting factor, driving safe-haven flows towards gold.
Oil Prices Turning Lower
Oil prices have started the week under pressure with crude futures down around 2% across the European open on Monday. The fresh strength in USD is no doubt having a downward impact. Additionally, fears of further lockdowns in China are raising demand concerns for oil as the country undergoes mass testing amidst a further outbreak in cases there.
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