NFP “Mood Swings”! Market Outlook

Noam Stiekema

We saw “mood swings” in the first hour of the release of NFP for June. 287K jobs were added, the highest in 6 months. However, May’s figure was revised downwards to a mere 11K, the lowest since Oct 2011!

NFP

By Wayne Ko, Head of Research & Education at Fullerton Markets

NFP posted the best figure in 6 months.  USD/JPY shot up 100 pips only to retrace back to pre-NFP level in less than an hour.

We saw “mood swings” in the first hour of the release of NFP for June.  287K jobs were added, the highest in 6 months.  However, May’s figure was revised downwards to a mere 11K, the lowest since Oct 2011!  Average earnings slowed to 0.1% and unemployment rate went up to 4.9%, both performed worse than expected.  The market celebrated initially as we saw USD/JPY shot up 100 pips in a minute, but the enthusiasm fizzled out quickly as we saw prices retraced back to pre-NFP level in less than an hour.

Although the figure is encouraging, we feel it is only good enough to increase the chances of rate hike in 2016 but not good enough for us to expect one this year.  Market is not pricing in anywhere near 50% chance of rate hike.  With the uncertainties from Brexit and US Presidential election, we foresee Fed to approach the next rate hike cautiously.

Brexit remains the top concern of the market.  Both UK Construction and Services PMI underperformed.  Manufacturing Production shrunk by 0.5%.  Sterling hit 30-year low.  Political uncertainties will continue to over-shadow economic data.  If economic data echoes the concern of BOE’s Governor, Mark Carney, it will only give market more reasons to sell the pound.  Are we seeing the bottom of the Sterling?  Judging from current situation, our take is no.

Both Aussie and Kiwi benefit from the demand for yield.  Market sort of shrugged off the political instability in Australia, S&P decision to downgrade Australia’s debt rating and chooses to focus on the fact that Aussie is still one of the higher yielding major currencies.  New Zealand has relatively lesser risk compared to their neighbour.  A heated property market has greatly reduced the chances of rate cut by RBNZ.

There are two central bank interest rate releases this week.  Bank of Canada is expected to maintain their interest rate and optimism as usual.  Oil prices may have dropped but it is still holding on much of the gain since start of this year.  The most interesting would be Bank of England.  This will be their first official rate announcement after the referendum.  Market is bracing for a rate cut, expecting all nine members of MPC to vote for a rate cut unanimously.  Even though market have priced in a rate cut to a certain degree, an actual rate cut could well possibly push the Sterling to another historical low.

Our Picks

GBP/USD – Bearish.  The support around 1.2870 may be holding for now.  BOE is expected to cut interest rate this week, an actual rate cut is likely to break the support.

GBPUSD

AUD/NZD – Slightly bearish.  As mentioned in the earlier paragraph, Kiwi has a slight edge over Aussie at this point in time.  We do expect the downward momentum to continue.

AUDNZD Fullerton Markets

Dow Jones (U30/USD) – Slightly bullish.  As a follow-up from last week’s research, we continue to hold our view.  Market has broke the 18,000 level.  Our suggestion is to buy at the dip.

DowJones Fullerton Markets

Top News This Week (GMT+8 time zone)

Canada: Overnight Rate.  Wednesday 13th July, 10pm. We expect figures to remain unchanged at 0.5% (previous figure was 0.5%).

Australia: Employment Change.  Thursday 14th July, 9.30am. We expect figures to come in at 8.5K (previous figure was 17.9K).

UK: Official Bank Rate.  Thursday 14th July, 7pm. We expect figures to come in at 0.25% (previous figure was 0.5%).

Read this next

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.

Digital Assets

Crypto trading volume spikes at Swiss bourse amid FTX collapse

The shockwaves from the historic collapse of Sam Bankman-Fried’s crypto empire are still being felt across the industry, but some trading venues are actually doing better because of it.

Executive Moves

CMC Markets adds Camilla Boldracchi to institutional sales

UK’s biggest spread better, CMC Markets has promoted Camilla Boldracchi to take on an expanded role within its institutional sales desk.

Institutional FX

FXSpotStream reports $1.48 trillion in monthly volume for November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2022, which moved higher on a yearly basis but reflected weak performance across executed trade volumes when weighed against the figures of the prior month.

Retail FX

Interactive Brokers’ client activity drops 30% YoY

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.95 million daily average revenue trades, or DARTS, in November 2022 compared to 1.96 million transactions in the prior month.

Digital Assets

The rise of Crypto ETPs in traditional exchanges as crypto winter deepens

Institutional investors are increasingly looking at traditional regulated exchanges as their first route into digital assets amid market turmoil caused by the crypto winter and the collapse of several big names within the space, including FTX. Acuiti and Eurex surveyed 191 buy and sell-side firms on their views of the digital assets markets in order […]

Digital Assets

TP ICAP’s crypto arm receives FCA’s go-ahead

UK interdealer broker TP ICAP has received a regulatory go-ahead to launch its cryptocurrency services in the UK. The bid shows that the recent collapse of FTX exchange has done little to damp the interest of big names in running their own crypto business.

Industry News

Coin Signals founder to pay $2,847,743 after prison sentence over crypto Ponzi scam

The U. S. District Court for the Southern District of New York has ordered Jeremy Spence, founder of Coin Signals, to pay $2,847,743 in restitution to victims of a fraudulent virtual currency scheme.

Digital Assets

CME Group goes DeFi: Reference rates and real-time indices of Aave, Curve, Synthetix

“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”

<