Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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NY Open: Over-hyped NFP fails to deliver
Michael O’Neill
FX Trader, Loonieviews.net
The US nonfarm payrolls report underwhelmed. The expected forecast-beating result was somewhat disappointing. (Actual NFP 157,000 versus a forecasted 190,00). Fortunately, unemployment dipped to 3.9%, matching predictions and providing damage controlfor the headline number.
The US trade deficit widened, and according to the Wall Street Journal, it did so at the fastest pace since November 2016. If anything, the news will irritate President Trump. China will annoy the President further as well, as Beijing is planning to slap tariffs of between 5% and 25% on a range of US imports.
FX markets reacted predictably to the US data. EURUSD popped to 1.1609 from 1.1570, GBPUSD jumped from 1.3002 to 1.3042 and USDJPY dropped to 111.38 from 111.60. The US dollar has recovered somewhat against the European currencies, but not against the yen.
The Canadian dollar got a double dose of good news. Canada’s trade deficit narrowed to a mere $0.63 billion, well below the forecast of a $2.3 billion deficit. The icing on the cake was the 4.1% increase in exports to $50.7bn, a record high, and the first time they have been above the $50bn mark. USDCAD was unable to break outside this week's 1.2975-1.3050 range.
Wall Street futures indicate a flat opening this morning.
The US dollar managed to rally against all the G-10 majors since last Friday’s New York close. The only exception was the Canadian dollar which managed a 0.55% gain (as of 13:00 GMT) The Swiss franc was unchanged. The week ahead will be lacking in some of the drama and excitement seen in this week; there are only two central bank meetings, the Reserve Bank of Australia and the Reserve Bank of New Zealand. Neither bank is expected to deviate from their dovish interest rate policies. China trade data will be a key focus, at least for the Antipodean currencies. Canada is closed on Monday.
USDX rangebound
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