The equity markets finished the week off well after the US tariff implementation came and went and we got some mixed signals from the US employment numbers on Friday. Tech Stocks led the way with the NASDAQ finishing up 1.34% after the Non-Farm Payrolls came out stronger than expected at 213k but Average Hourly Earnings failed to hit expectations and the unemployment rate jumped 0.2%. This is unlikely to have any major effect on the Fed’s thinking at this stage and the market is still expecting a further two rate hikes this year with the now standard caveat of ‘depending on the impact of Trade tensions’ that most of the market is now having to quote on every comment.
The dollar lost ground against all of its major counterparts on Friday with the DXY dropping down to the 94.00 level as risk trades experienced a rally in line with the perky stock markets. The euro rallied to its best level since the mid-June ECB meeting and now targets 1.1850 on the topside and 1.1500 to the south. The pound had a strong topside move as UK PM Theresa May made progress with her cabinet over the weekend on Brexit, although of course expect more volatility for sterling as further discussions and details come to light as the week progresses.
Looking ahead to this week’s trading and of course we will continue to monitor further developments on the escalating trade dispute between China and the US as this theme continues to provide volatility across risk trades. We also have some strong tier 1 data due, the Bank of Canada’s latest rate decision and we’re due to hear from some of the worlds major central bankers. We kick off today with the BOJ’s Kuroda speaking at the BOJ quarterly branch meeting and move onto the EBC’s Draghi testifying before the European Parliaments Economic and Monetary Affairs Committee later in the day.
There’s not much due out of the US market today in terms of data releases or risk events, however, expect news on the overall trade situation and North Korea denuclearization issue from the US administration as we move through the trading day.