Spot values at a glance:
Asian stocks were mixed, with equities in Tokyo, Sydney and Singapore gaining and indices in Shanghai, Seoul and Kuala Lumpur falling. The dollar and crude oil extended gains, while gold and Treasuries declined.
- Nonfarm payrolls for March rose by 98,000, from a downwardly-revised 219,000-gain in February, and missing the consensus estimate of 180,000. The unemployment rate fell to 4.5%, the lowest in almost a decade, from 4.7% prior and lower than the median estimate of 4.7%.
- March’s increase in payrolls was led by providers of professional and business services, which added 56,000 jobs. Retailers cut around 30,000 positions for a second month amid reports of store closings, while gains in construction and manufacturing eased. Factories and construction payrolls both gained, by 11,000 and 6,000 respectively.
- The labor workforce participation rate remained unchanged at 63.0, while the underemployment rate reached a post-recession low of 8.9%. Average hour earnings rose 0.2% month-on-month and 2.7% year-on-year, matching expectations.
- New York Fed President William Dudley downplayed the length of any pause in short-term rate normalization by the Fed when it starts to shrink its balance sheet.
- According to a news report from the Financial Times, China will offer better access for US financial products and beef after the nations’ leaders decided last week they needed results on trade talks within 100 days.
- The US dollar rallied after lower-than-expected nonfarm payrolls Friday, as the Bloomberg Dollar Spot Index ended its session 0.3% higher and added a further 0.2% earlier today.
- US yields rebounded from its session lows of below 2.30%, reversing course to end Friday 4bps higher at 2.38%, following Dudley’s comments.
- The S&P 500 Index closed 0.1% lower, with losses by utility and energy shares offsetting gains by consumer staples stocks.
- The Fed’s St. Louis President James Bullard commented that he prefers the Fed’s balance sheet to be nearer to the $2 trillion range, more than half of the current $4.5 trillion. He also added that last Friday’s jobs report were consistent with a 2%-growth for 2017, which is in line with his predictions.
- 19,400 jobs were added in March, up from the 15,300 gain in February and more than the 5,700 rise economists were predicting. Full-time jobs rose by 18,400, down from 105,100 a month ago, while part-time employment gained by 1,000, up from an 89,800 increase in February.
- The pace of annual wage rate fell to 1.1%, the lowest since the 1990s, underscoring the fact that there is little evidence a robust employment picture is feeding into wages. From a historical perspective, wage gains have averaged 2.7% over the past decade.
- The unemployment rate ticked higher to 6.7%, from 6.6%, matching expectations.
- In summary, policy makers in Canada have been wary of recent upswings in economic data and this report will probably feed their worries despite the jobs gains. While economic growth has been accelerated and employers are hiring, it’s hard to conclude the recovery has fully taken hold without a pick-up in wages.
- BoE Governor Mark Carney urged banks to get contingency plans in place for all potential Brexit outcomes, as the 2-year countdown to the UK’s departure begins. Carney said the transition poses a risk to financial stability and warned that if it leads to reduced cooperation on regulation and other issues, this will have a negative impact on the economy and jobs.
- Industrial production in February slipped 0.7% month-on-month and gained 2.8% year-on-year, missing consensus estimates of 0.2% and 3.7% respectively.
- Manufacturing production over the same periods underwhelmed as well, falling 0.1% from a month ago and rising 3.3% from a year ago, missing the predicted 0.3% and 3.9% respectively.
- According to Bloomberg Intelligence, China’s tighter restriction on moving money abroad, coupled with higher interest rates and stronger economic growth may have reversed 2 years of capital flight. A net inflow of about $23.9 billion was recorded in February, compared to a net outflow of $71.4 billion in the month prior. This may help explain the yuan’s stability this year.
- Home loans in February declined 0.5% from a month earlier, after gaining 0.4% in January; analysts had expected no change.
- Investment lending fell 5.9% in February, reversing course from a 4.6% gain in the month prior.
- Spot gold failed to close above the key 200-day moving average of $1,259/Oz, despite rising to a high of $1,270.87/Oz earlier in its session on Friday. The metal erased most of its gains by Friday’s close, as investors weighed speculation that the Fed will begin the process of balance sheet normalization later this year, and was 0.2% lower at $1,251.93/Oz earlier today.
- Any further upside for gold needs to be accompanied by a convincing break and close above the metal’s 200-day average.
- Silver for immediate delivery fell back below its 200-day moving average of $18.0851/Oz, declining 1.0% on Friday and a further 0.6% to $17.9275/Oz earlier today.
- Crude oil futures expiring in May extended gains to above $52/bbl, after Russia signalled she is weighing an extension to OPEC-led production cuts. Russian Energy Minister Alexander Novak said the country has been in discussions with oil companies regarding the need to prolong the 6-month deal when it expires.
- In the US, companies boosted drilling to the highest level since August 2015, as Baker Hughes Inc. reported oil rig count rose to 672 last week.
- Spot 1.4076
- USDSGD advanced 0.2% to 1.4082 on the back of broad US dollar strength today and is on track to close higher for the eighth consecutive session.
- The pair’s next resistance coincides with its 100-day moving average at the 1.4200 handle.
- Spot 0.7484
- AUDUSD slipped 0.3% to 0.7478 earlier, breaking below the key 0.7500 support level.
- The momentum remains strongly to the downside for the currency pair, as it remains on due course to test the next support at 0.7300.
- Spot 1.3422
- USDCAD rose 0.2% to 1.3426 earlier today amid broad USD strength and despite continued crude oil price gains.
- According to Bloomberg news, top currency forecasters are predicting the Canadian dollar to weaken in the coming months, driven by continued divergence in monetary policy between the nations’ central banks. The main consensus is that the loonie will weaken to 1.3500 to the US dollar over the coming 6 months.
- Spot 6.9073
- The PBOC earlier weakened its yuan fixing by 0.13%, to 6.9042 to the US dollar – the lowest level in almost 3 weeks.
- The central bank skipped the use of reverse-repurchase agreements for an 11th straight day, the longest run since it began daily open-market operations last year, as cash supply is seen to be improving as lenders are now more willing to lend.
- USDCNH gained 0.4% to 6.9148 amid broad USD strength today.
- Spot 111.43
- USDJPY extended its rebound off the 110 support, gaining 0.4% to 111.58 earlier today, the pair’s highest level in a week.
- The resistance at 112 remains.
- Spot 1.2465
- GBPUSD slid 0.7% to close below 1.2400 Friday, the first time the pair closed below 1.2400 since 17 Mar.
- Further bearish momentum is expected for the currency pair, with the 1.2200 support on the horizon.