Calendar Week 28-2023
RBA holds and USA Non-Farm Payrolls shows some weakness in US economy. Stocks pumped and dumped with the Greenback just simply dumped. Commodities saw oil and copper do well but the rest underperformed.
The interesting market was bond land which say the short end initially spike on NFP but then fell whilst the long end continued its rally. This flattening of the curve from its inverted state is generally considered the beginning of a recession.
The week ahead brings US CPI data on Wednesday and PPI on Thursday giving us an indication of where the Fed will be on July 27th. Market is pricing in a 25bps hike.
Volatility will also increase for the Kiwi (RBNZ meeting on Wednesday) and the Loonie (BOC meeting on Thursday) as well as the Sterling (UK GDP Thursday).
USD – The Greenback has been the safe haven of choice recently, however the move on Friday was not unwinding safety as stocks were mixed. With Fed Funds rate also still indicating rates to be higher, the weakness in US jobs and short end rates also indicate that the US dollar move was not linked to that. Simply put, this was not a fundamental sell off for the US dollar but more a rotational one with all the majors benefiting from the move. Therefore, I do not see it being a long term shift into weaker US dollar for longer. Technically it is lost in a range and it will come back and fill that aggressive leg down from 103.
AUD – The round number game for Aussie. Bouncing of 0.6600 up to then failing and fading off 0.6700. Will be stuck in here for much of the week I suspect.
EUR – Like the Greenback, it looks lost and should track back to low 1.09s to fill in the gap up.
GBP – Beat June highs by 1 full pip. I still cannot get excited by the UK economy to agree from a fundamental perspective on supporting this move higher. However, technically it should find buyers in the 1.2780 region and rotate up from there.
JPY – Last week I wrote this should rotate to 140, it did much of that in one day. Ideally it should back fill that aggression into the mid 143’s before having another leg down.