USD higher despite lacklustre NFPs
(by Arnaud Masset)
The greenback rallied strongly on Friday while stocks closed flat after a mixed job report.
Non-farm payrolls rose just 98k in March, widely missing estimates of 180k, while the previous month's reading was revised down to 219k from 235k.
The headline unemployment rate slid from 4.7% to 4.5% and the underemployment rate fell below the 9% threshold and reached 8.9%, the lowest level since December 2007.
All in all, this job report is of little help to investors as it does not add clarity to the US outlook, especially since wage growth was slightly disappointing as it fell to 2.7% y/y, highlighting that job gains have failed to translate into higher wages.
Looking at US yields, it seems investors are becoming more confident that the Fed will hike its benchmark rate by another notch in June. Nevertheless, more hard data is needed to validate such a move, especially since the FOMC minutes showed that Fed members started to discuss unwinding its balance sheet.
For now, the market is focused on political developments such as the French and German elections and the meeting between Donald Trump and President Xi Jinping in Florida last week.
As the latest polls in France showed that Le Pen and Macron will both make it to the second round, the EUR/USD returned below 1.06. The market is on risk-averse mode this morning with gold stepping higher and high-yielding currencies tumbling. EUR/USD is currently testing the bottom (at around 1.0575) of its uptrend channel. A break of the latter support will open the road towards 1.0341.
Oil remains bullish
(by Peter Rosenstreich)
Oil's bullish momentum continues, supported by solid demand expectations and growing uncertainty from the Middle East.
WTI crude front end rose to $52.94 brl, although US drillers continue to increase output keeping the upside contained.
The higher crude prices are a core driver for stronger Emerging Markets asset prices. The escalations in the Syrian conflict and the coming OPEC meeting suggests further upside in crude prices.
However, President Trump's more interventionist policy could stress the balanced relationship of OPEC members.
The demand side of oil recovery highlights the solid economic performance globally, which will support EM export-driven economics. And despite idiosyncratic risks popping-up, generally the conditions are correct for further EM FX accumulations.
In addition the meeting between President Trump and President Xi was seen as extremely cordial and positive, setting the correct tone for global trade (and risk sentiment).