In a market wrap, analysts at Westpac Banking Corporation explained that the mixed US employment data produced volatility but US bond yields resumed their rise and equities closed sharply lower for a second day.
Key Quotes:
“AUD and NZD continued their underperformance, AUD/USD slipping under 0.7050.”
“Over the weekend, China loosened bank lending rules, ahead of China’s first trading day of the month. Australia’s calendar is low key while US markets have a partial holiday.”
Currencies and macro themes
“US September non-farm payrolls rose just +134k, well shy of lofty expectations that formed in recent days after surveys hinted at a very robust report.”
But +87k in upward revisions to the prior two months leave a broadly stronger labour market picture intact.”
“The unemployment rate ticked lower again, from 3.9% to 3.7%, its lowest level since 1969.”
“The closely watched average hourly earnings data matched expectations with a +0.3%, but this may have been distorted higher by Hurricane Florence”
“Last month’s 0.4% increase in earnings was revised down -0.1ppt to 0.3%, while the annual pace slipped to 2.8% from 2.9%. This was not the blockbuster jobs report many were looking for, with weather distortions clouding the picture, though the jobs market remains strong.”
“Currencies were whippy around the employment data, given the mixed headlines.”
“EUR/USD ranged between 1.1485 and 1.1550 but starts the week barely changed net, around 1.1525.”
“Sterling outperformed other G10 currencies after some supportive Brexit comments from the EU, GBP/USD up from 1.3010 to 1.3125. EU’s Juncker stated that EU/UK Brexit negotiations had progressed in the past week, raising expectations that a deal could be agreed upon into a special but still to be confirmed November summit on Brexit.”
“USD/JPY ranged between 113.55 and 113.95, torn between higher US yields and sliding equities.”
“AUD/USD extended a multi-week decline to 0.7043 – the lowest since February 2016.”
“Underperformer NZD similarly extended recent losses to 0.6432 – the lowest since 2016.”
“AUD/NZD rose from 1.0920 to 1.0955. Both AUD and NZD flickered slightly higher at Monday’s open after China’s central bank cut bank reserve requirements for the fourth time this year in a bid to support the economy.”
“Canada employment data continued its volatile run, +63k in Sep after -52k in Aug, with all the jobs growth part-time. The unemployment rate edged down to 5.9%. USD/CAD was little changed overall.”
Interest rates
“The US 10yr treasury yield extended a multi-day rise, from 3.20% to 3.25% – the highest since 2011 – while the 2yr yield retested 2.90% – the highest since 2008. Fed fund futures yields continued to price the chance of another rate hike in December at 80%.”
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