In an interview with Jordi Martinez at FXStreet we discussed the impact of the Non-Farm Payrolls, the sterling volatility of sterling, the antipodean currencies and other topics.
here goes:
What’s your take from the NFP release? Does it eliminate the chance of a Fed rate hike in June or July?
The NFP is undoubtedly a disaster, the worst since 2010 and including revisions it shows a net loss in jobs. June was already off the cards with Yellen talking about “coming months” in plural and the UK EU Referendum. For July, the odds according to bond markets dropped to 42%, but I believe the market is overreacting. We may still see a bounce in the next NFP and together with a “Bremain” vote and for positive GDP estimates for Q2, we could still have a hike in July. July is the last option to hike before the elections and Fed might want to find reasons to act. All this hawkishness could be found once the dust settles from this terrible report.
Which USD pair do you think will be the most volatile during this month of June?
With UK opinion polls showing a tight race, any outcome and especially a Brexit result put GBP/USD as the top pair in terms of volatility. Cable is usually more volatile than some of its peers and this binary and unprecedented referendum, held when markets are open makes potential volatility very high.
What’s your outlook on the antipodean currencies?
Both antipodean currencies are currently on the move following the NFP, but this may not necessarily continue. The central banks in both Australia and New Zealand may cut rates and become more noisy regarding the strength of their currencies. I would expect the Aussie to slide on fresh Chinese worries and the kiwi to drop on a rate cut next week. Regarding AUD/NZD, my bias is bearish as the New Zealand economy seems less vulnerable to global headwinds.
Do you think the USDJPY will continue its long-term downtrend moving below 105.00? Has the BoJ any power to prevent that run?
USD/JPY could extends its falls on coming days, reacting to the NFP. However, Japan has always been in the forefront of monetary policy action and the BOJ could lead with ever-more-ambitious stimulus. The BOJ may introduce helicopter money or any other form of outright monetary financing, boosting Japanese stocks and USD/JPY. Until their meeting, verbal intervention against “disorderly FX moves” will probably be ignored by markets, and a temporary drop under 105 is certainly on the cards.
What’s your outlook on the oil prices after the OPEC Meeting?
OPEC tried to prove it’s not dead but only resting. Nevertheless, the biggest market mover is the US shale industry, which pushed prices down with rising production and is now keeping oil prices bid with a very gradual drop in production. My bias is negative on oil, assuming production picks up in the US.
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