In a week where we have seen a marked turnaround in USD sentiment, the US payrolls release carried added sensitivity to the market.
FX has been the dominant force in this respect, with Fed rate hike expectations slowly eroded through the year, and USD sales gathering momentum in recent sessions. The US Dollar Index has been slammed though the December lows, but now finding some support above 97.0.
Poised for further weakness, the lower 151k headline read in Nonfarm Payrolls was largely offset by the fall in the unemployment rate to 4.9%, along with higher than expected earnings.
USD/JPY tested sub 116.50 a number of times, but bounced back each time. EUR/USD also tested higher before getting slammed, finding support ahead of 1.1100 – which still looks vulnerable. Cable has been a little more volatile, losing ground in early London on the latest YouGov polls showing the ‘leave’ camp gaining further. EUR/GBP made a clean break of .7700, but was later reined in despite the GBP spot rate dropping back through 1.4500. CAD gains look to have run their course, with Thursday’s highs under 1.3640 drawing a line for now. Back in the mid 1.3700’s, a softer Canadian jobs headline contributed to a 1.3800+ return, with lower oil also bolstering. Looking ahead, everyone will be hunting for clues on Fed thinking, so Fed chair Yellen’s testimony to the House and Senate will be the focal point over Wednesday/Thursday. US data is stacked up on Friday led by Jan retail sales. Otherwise, Chinese New Year should add to some near term calm.