USD ends the week lower despite reasonable nonfarm headline

Good morning

I hope you had a good weekend and were not too badly affected by the storms.  We got away with it although I have to say I don’t remember a time when a storm lasted so long with such ferocity.  We seem to have had more than our fair share of storms recently I’d say, the coming week looks as though it will be more settled but likely on the chilly side. 

In contrast, the US nonfarm payrolls came in pretty hot Friday with a headline of +227k, plus an upward revision to previous readings.  The average hourly earnings number came in stronger than expected albeit the same as last month, although the unemployment rate did tick up to 4.2% from 4.1%.  Overall not a bad set of data but it was not enough to stop the US dollar moving lower, initially at least, with GBPUSD trading up to 1.2810 and EURUSD to 1.0625.

Those moves, which I have to say came as a bit of a surprise, soon reversed, sending GBPUSD and EURUSD lower to 1.2720 1.0540, helped by some reasonably hawkish comments from Fed officials who in general certainly seemed to prefer a gradual approach to rate cuts, Bowman warning that cutting rates too quickly could reignite inflation.  Only Goolsbee sounded too a more dovish tone, continuing to see much lower rates through 2025 although even he agreed that the pace of cuts would have to slow next year. 

This morning we’ve already seen a bit of two-way action, both GBPUSD and EURUSD initially traded lower but are now off those lows at 1.2765 and  1.0565 respectively.  GBP remains strong vs EUR, now in the high 1.20s, almost equalling the highs we have seen so far this month, just short of 1.2100.

Friday also saw Canadian jobs data, a bit of a mixed bag with a better than expected net employment change but a higher unemployment rate, which makes a 50bps cut by BoC on Wednesday all the more likely.  CAD is lower, USDCAD is 1.4170, GBPCAD up at levels not seen since the end of October, around 1.8060.   

Gold has been reasonably stable recently despite the various geopolitical issues around the world.  The news that China added to its gold reserves after some months of inaction helps see gold at the higher end of recent ranges, now US$2,645.  China now hold 72.96 million ounces, up from 72.8 million, having probably used the recent dip to $2,540 to add to their holdings.  This may not send gold higher but I’d imagine China would still have interest to buy on dips, which should see gold prices supported. 

Elsewhere in the world, USDKRW spiked again to reach a high of 1,438 overnight, the political turmoil is far from over following the attempted introduction of martial law last week.  In Syria, rebel forces have ousted Assad who has retreated to Moscow.  I’m still unclear as to whether this is good, I mentioned the other day that I thought Assad used to be on ‘our’ side, while some those who now seem to be in control of Syria could well have originated from ISIS.  The US have conducted large scale airstrikes on ISIS targets in Syria in the hope it prevents a resurgence of the terror group.  Let us not forget though that Russia supported Assad and there must be concern that US and Russian forces could, at some stage, meet in conflict in the region.

Notre Dame has reopened after five years of reconstruction following the devastating fire back in 2019.  It is worth noting that Hammersmith bridge, which was closed to vehicles around the same time as the Notre Dame tragedy, remains closed and looks set to be shut for another five years.  Pretty shocking that this is not a priority and I fail to understand just how it can take so long, and so much money, to repair.  Latest estimates are for a bill of some £250 million but we all know it would probably end up being nearer £1 billion.

So, in sport, Spurs put on a rather typical performance against Chelsea, losing 4-3 after letting a two goal lead slip, helped in no small part by two naïve, unnecessary and frankly ridiculous tackles that handed Chelsea two penalties.  Chelsea look good mind you and deserve their second place in the league table after Arsenal could only manage a draw against Fulham. 

In cricket, England won the second test against New Zealand by a large 323 runs, bowling out the hosts for 259 after having declared in their second innings at 427/6.  Next test starts on Friday.

In Formula One, congratulations to McLaren for winning the constructors championship, in doing so becoming the first team outside of Red Bull and Mercedes to win the title since 2009.  It was close, Ferrari were just fourteen pints behind McLaren on 652 points, while Red Bull were third with 589.  That’s it for the season now, the next season starts on 16th March in Australia. 

Another major contest was decided over the weekend.  Yes, the finals of I’m a Celebrity saw McFly’s Danny Jones winning the crown.  He’d been the favourite since the start and had been pleasant all the way through but by the end of it, for me Coleen Rooney would have been a more worthy winner.  

Right, back to work.  Not a lot on the calendar today but plenty coming up through the rest of the week, including rate announcement from ECB, BoC and SNB.  We also have inflation data from US and Germany, and Aussie employment numbers.  We start overnight with the latest rate announcement from RBA.  They are widely expected to keep rates unchanged at 4.35%, it will be the tone of the accompanying statement that will be of more interest.  For now, GBPAUD is 1.9820 having been just 25 pips short of 2.0000 last Friday.

Wow, that all went on a bit.  I’ll leave it there for now, have a great day

-  13.00 BoEs Ramsden speaks

-  03.00 China trade balance

-  03.30 RBA rate announcement

-  04.30 RBA press conference

-  07.00 German HICP