London 02/09/2022
The US Bureau of Labor Statistics announced today the new job positions (Non-Farm Payrolls – NFPs) in August. The result (315K) was not much different than the consensus of the markets (300K) but it was much lower than the result of July (526K). Markets reacted immediately with a weakening of the US dollar. The anticipation is that the Fed does not have much room for more aggressive interest rate hikes because the NFPs result (even slightly above markets’ estimations) does not imply a strong macroeconomic outlook of the economy to allow it. The probability of a rate hike of 0.75% on Sept, 21st has dropped from 74% to 64% today.
Beyond this fresh news, the US economy had also positive news from the manufacturing PMIs announced yesterday, all above markets’ expectations. The US stock indices have recovered after NFPs but still are bearish this week.
Europe continues to have a decent macroeconomic picture, as we will see below in the EURUSD section, despite the fears and concerns for the difficult upcoming winter. Earlier today, the G7 finance ministers agreed to impose a price cap on Russian oil as a new sanction for Russia’s war in Ukraine. The oil prices though are rising today, flirting with $90 per barrel. Gold also has a bullish reaction today but it is still bearish on a weekly basis. Bond yields keep on rising and the US 10-year bond yield managed to surpass 3.26% today, having five consecutive bullish weeks.
EURUSD (current price at 1.0011) is bullish this week although the dollar is profitable this week. This fact shows that the euro has strengthened significantly and this fact is based mainly on two reasons. First of all, there is an improved sentiment after the statements of the President of the European Commission Ursula von der Leyen that Europe intends to cap the energy prices to stabilize the prices. Secondly, the Eurozone & Germany had decent economic results, regarding the unemployment rate, retail sales, and the PMIs. Combining these results with the high inflation (9.1%) that was announced earlier this week, markets consider a higher probability of interest rate hikes by the ECB. Of course, the strong uptrend of the dollar has not changed yet and every solid breakout below 1:1 may help the bears to take over. It takes a reaction above 1.0090 for the bulls to have a better chance.
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GBPUSD (current price at 1.1563) is bearish for the 3rd week in a row as the weakening of the sterling is strong and obvious. The weakening of the dollar after NFPs has caused a weak bullish reaction which is not able to change the main trend. Without having any important news from the UK economy this week, the markets and the analysts are dominated by the general sense of estimations that inflation will keep on rising and that the upcoming recession will be deep and it will last many quarters. The strongest support for the GBPUSD is the price zone of 1.1410 which was the lowest price in March 2020 when the pandemic was beginning.
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USDJPY (current price at 140.33) is bullish this week as the dollar is bullish and the bond yields are rising. Most analysts agree (according to Japanese officials’ statements and estimations) that the Bank of Japan intends to continue the ultra-loose monetary policy and the negative interest rates. It means that besides the strong dollar and the rising bond yields, the yen also contributes to the pair’s uptrend and as a result of this, we see the USDJPY climbing above 140 which was the highest price since 1998. The bullish trend is established and only some profit-taking action may cause serious corrections for now.
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DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
