Spreadex Market Update
Dollar At Highs Ahead of June NFP Release Today
Today’s the day; the latest set of US labour reports will be the headline focus for markets with the US Dollar holding at 20-year highs ahead of the release. Yesterday we heard further hawkish commentary from Fed’s Bullard and Waller who both voiced their support for pushing ahead with a larger 75bps hike in July. Notably, both Fed members also expressed their judgement that the US economy will be able to avoid a hard-landing despite aggressive Fed tightening. For the numbers today, the market is looking for 260k on the headline NFP, down from 390k prior with unemployment rate and average hourly earnings both expected unchanged at 3.6% and 0.3% respectively.
Key Factors for Today
- USD near highs ahead of June NFP release later
- Fed’s Bullard and Waller stick to hawkish views
- Risk assets a little softer ahead of NFP today
- ECB minutes firmly hawkish – larger hike in play for July
- Gold and silver pause near lows
- Oil rebounds 10% off week’s lows
Coming Up
- USD NFP, Average hourly earnings, unemployment rate
- CAD Unemployment rate
- EUR ECB’s Lagarde speaks
Risk Sentiment Firmer on Week, Softer Today Ahead of NFP
Despite a bad start to the week, risk-sentiment has rebounded over the last few days with asset markets around the world finding their feet following initial USD strength. With the USD rallying failing to follow through, stock markets have since rebounded. However, today’s US labour market data might put an end to this move if we see USD trading higher consequently. On the other hand, if USD is seen falling on the back of the release this should propel the risk rally further. Ahead of the release today equities indices are trading broadly lower over the European open.
JPY Takes the Lead in FX
In FX, the Japanese yen has been the strongest performer over late Asian and early European trading. JPY has benefitted from the lull in risk appetite this morning as traders brace for US labour data later today. Yesterday saw GBP rallying firmly in response to news of PM Boris Johnson’s resignation. Johnson will stay in office until Autumn, to give the conservative party time to find a replacement, yet markets seem to be reacted positively signalling a hope that a new leaders can restore some unity and cohesion to UK government.
ECB Minutes Firmly Hawkish, Lagarde Up Next
The June ECB minutes yesterday showed discussions at the central bank to be firmly hawkish with some policymakers calling for more aggressive action. There was plenty of concern voiced over the path of inflation and the need to act decisively in order to quell rising prices. Traders are now looking for a 50bps hike in July, up from 25bps initially and will be paying close attention to ECB chief Lagarde who speaks today along with the latest set of EU economic forecasts.
Gold & Silver Pause Near Lows
Gold and silver prices are both holding at the foot of recent declines. Following both metals breaking out to fresh 2022 lows earlier in the week, the declines have now paused in line with the pause in the USD rally. Today’s US labour data will be the next key input for metals prices with the potential to drive a move in either direction.
Oil Bounces 10% Off the Low
Oil prices have recovered around 50% of the week’s declines over yesterday and today, boosted by the better risk tone over recent days. With the USD rally pausing, crude prices have since rebounded around 10% off the week’s lows. Despite mounting recessionary fears, oil prices are still being underpinned by supply tightness and returning demand in the aviation and broader travel sectors.
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