The NFP on Friday came in less than expected (156K versus and expectation of 178K), but we saw a large revision of the NFP of last month (from 178K to 204K). In any case, 156K is still a solid number. Initially we saw the USD weaken as focus was on the miss of the headline, but this changed quite quickly as a closer look was given to the rest of the data and also the revision. Especially important was the growth in wages, which has been lagging for a while and is also an important factor for the FOMC with regards to raising the interest rate.
There will be more data out of the US this week obviously, but the most interesting events will be the different speeches by several FED members, and especially the one from FED Chair Yellen on Thursday.
Currencies
EUR/USD – was unable to remain above the 1.06 level after the NFP caused the USD to strengthen. Nonetheless, if we look at other pairs, the EUR is no doing so badly at the moment. Most other pairs are trading at or near lows versus the USD, while the EUR is not, or at least not yet. This week will see no major data released out of the Eurozone, which means that the focus will stay on the USD.
USD/JPY – is moving up again as the USD has been gaining ground since the NFP. The question is if we will reach the resistance around the 118.6 level again and if there will be enough strength to break through that level.
GBP/USD – started a strong decline after reaching the highest level in 2 weeks on Thursday, which fastened after the NFP. Britain’s PM May said yesterday during an interview that freedom on its immigration policy is more important than remaining part of the single market. In addition, Scotland again said that it is seriously considering another referendum on leaving the UK due to the Brexit, as a vast majority in Scotland voted to remain part of the EU. All of this is sending the GBP to its lowest level in since the end of October.
USD/CNY – after seeing two days of sharp drops, we are seeing a strong move up as it appears that the PBOC will not take further measures to stem capital outflows and strengthen the CNY, although we have to see for how long that will hold. Tomorrow we will have inflation data out of China.
USD/TRY – is continuing to move higher and mark new record highs. If you believe that the weakening of the TRY is overdone, keeping a long-time sell position could be interested as there is a positive swap on sell positions.
Bitcoin – is seeing a very sharp drop after reaching a new record high on Wednesday. The reason for this is that China is likely to tighten regulation on crypto-currencies, just as China caused the price to tumble after the previous really a few years ago. The reason why this has such a large impact on the price of Bitcoin is that the vast majority of demand comes from China and that the new policy could curb that demand.
Indices
Dow Jones – is again flirting with the 20,000 level, and it looks like it will cross that level very soon and possibly even today, as economic data out of the US remains very solid.
S&P 500 – reached a new record high after the NFP. While the number was lower than expected, it still showed a solid number, especially if we look at the fact that there was a significant upwards revision of last month’s NFP. Also important is the fact that wages went up, which means people have more money to spend.
Commodities
Gold – lost ground on Friday after the NFP, even though the NFP itself was lower than expected. Gold reached the highest level in a month on Thursday, but was unable to remain above the resistance level around the 1177 level. Nonetheless, the first week of 2017 started off quite well for gold, just as was the case in 2016.
Oil – is waiting for more indications as there as several different factors at work. On the one hand, the inventories in the US dropped with over 7 million barrels, but production was slightly up, as was the amount of active rigs. It appears that the different OPEC countries are so far complying with the agreement to cut production, but the question is if there is full compliance. On the other hand, production from the countries which are exempt from cutting production appears to be increasing, as we see that Iran has sold over 13 million barrels since October from its tankers at sea and we have also seen production in Libya increasing.
Stocks
Fiat Chrysler – after GM and Ford made headlines last week, now it’s Fiat Chrysler’s turn .They announced that they will invest $1 billion on 2 plants in the US to modernize them which will create jobs in the US, something that will please President elect Trump.