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Bullet Report: USD Stronger Despite Weak NFP
The USD had a rollercoaster ride on Friday after US NFP showed that only 151k jobs were added versus 180k forecasted. The USD initially suffered losses on the news, but managed to quickly recover and finish the week strong versus other major pairs. The Fed has been quite aggressive in its talks regarding the state of growth in the US economy, indicating a potential rate hike as early as September, however the actual jobs figure might derail its plans. This week features Central Bank Rate decisions from Canada, Australia and Europe.
Currencies: The market reaction on Friday shows that traders still expect a rate hike this year despite the weaker than expected NFP on Friday. Actual forecasts are at 21% chance of September hike, down from prior day’s 24%. Chance of December hike also dropped to 50.6%, down from prior day’s 53.6%. The EUR/USD lost 0.64% in the last week. The single currency is trading at $1.1160 as the rally from earlier in the week boosted the USD. The under-performing NFP only sapped some momentum from the direction of the move, but the USD managed to appreciate on a daily and weekly basis versus the EUR. Yen ended as the weakest major currency on expectation of BoJ easing in September.
Stocks: Stocks also closed the week mildly higher with DJIA ended at 18491.96 while S&P 500 closed at 2179.98, staying in recent range. Meanwhile in Asia, stocks were broadly higher on Monday, as the weaker than expected US jobs data eased worries over an imminent rate increase from the FED. Higher interest rates in the U.S. increase the chances of foreign capital pulling out of emerging markets.
Oil and Gold: OIL dropped 6% in the last 5 days. The price of oil was erratic in the last week of August as concerns with overproduction, stronger USD and lower global growth forecasts combined against the lukewarm efforts of the OPEC to bring down the price of oil. Despite a rebound in the USD after initial weakness on the release of a weaker-than-expected U.S. employment report, gold ended the week with a rally from important support ($1308), closing the session with a 0.73% gain. For the week overall, gold was marginally higher.
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