Rates: Developments on trade scene trump US payrolls
Development on the US trade scene could underpin demand for core bonds going into the weekend and overshadow today’s payrolls report. US President Trump’s verdict on an additional $200bn of Chinese goods looms, talks with Canada are deadlocked, negotiations with the EU restart on Monday and Japan could be targeted next.
Currencies: Will payrolls be able to provide any guidance for USD trading
Yesterday, EUR/USD didn’t show a clear picture as global uncertainty persisted. Today, the focus remains on the US. Payrolls are expected solid, but will the report be strong enough to inspire any sustained USD gains? USD/JPY is becoming more vulnerable to global trade tensions as US president Trump might target Japan next.
The Sunrise Headlines
- Major US equity indices losMajor US equity indices lost ground on Thursday with NASDAQ (-0.91%) underperforming for a second straight day. Asian markets wary looming new tariffs and open with losses, heading for their worst week since February.
- The public comment period on the tariffs targeting $200bn of Chinese imports ended this morning. So far, the White House has made no announcements. Businesses made a last-minute push to convince Trump to reverse course.
- US President Trump’s hunger for trade wars hasn’t been satisfied, hinting that Japan could be targeted next. He said he has a good relationship with Japan, but that it will end “as soon as he tells them how much they have to pay”.
- Brazilian’s far-right presidential candidate Jair Bolsonaro, who currently leads opinion polls, was stabbed during a street rally. The former Army officer underwent surgery and is in stable condition, according to hospital officials.
- The leaders of France, Belgium, The Netherlands and Luxembourg warned the UK that cherry picking of EU rules is not an option. French President Macron added that EU members will stay “extremely united”.
- Canada is still in full negotiations with the US over a renewal of Nafta. After talks yesterday, a US official said three key issues remain in the way of a deal: future trade disputes, dairy quotas and cultural issues. Talks continue today.
- Today’s US eco calendar contains payrolls, unemployment rate and average hourly wages for August. Several Fed members speak. In the UK, the BoE releases the household expectation for inflationains payrolls, unemployment rate and average hourly wages for August. Several Fed members speak. In the UK, the BoE releases the household expectation for inflation
Currencies: Will Payrolls Be Able To Provide Any Guidance For USD Trading
Will payrolls unlock the USD stalemate?
On Thursday, EUR/USD basically kept a sideways trading pattern. US data were mostly strong but failed to inspire any meaningful USD gains. The negative risk sentiment had also little impact on EUR/USD trading. The pair closed at 1.1623, little changed from Wednesday evening. The global equity correction finally also caused some safe haven bid for the yen. The slide in USD/JPY accelerated on press headlines that Japan could be the next target in president Trump’s campaign to address issues on trade. USD/JPY closed the day at 110.75 (from 111.53). This morning, global risk sentiment remains negative. Most Asian equity indices shows moderate losses. EM tensions haven’t disappeared yet, but most of the hard-hit EM currencies show signs of stabilization. EUR/USD hovers near 1.1625. The yen remains strong (USD/JPY near 110.60). Today, the focus probably remains on the US. Regarding the data, the US payrolls take center stage. Job growth is expected solid (191.000). Markets will again keep close eye on wage growth (AHE expected at 2.7% Y/Y). The payrolls remain important for USD trading. However, of late, the reaction of the USD (and of interest rate markets) to US eco data was often muted. A big surprise is apparently needed for markets to change expectations on the Fed rate path. New actions from president Trump on international trade (China tariffs/Canada) remain a wildcard. Risk-off related to trade war issues had only a limited impact on EUR/USD trading of late. USD/JPY might become more vulnerable. Recently, the dollar lost some momentum and pressure on the euro due to uncertainty on Italy eased. We maintain the view the EUR/USD 1.1791/1.1850 resistance will be tough and keep a cautious USD positive bias even as we are well aware that the USD momentum was far from impressive of late.
Yesterday, in technical trade, sterling trade with a slightly positive bias. There were no eco data and there was no high profile brexit news. EUR/GBP finished the session just below the 0.90 handle. More technical order driven trade might be on the cards today. There are only second tier eco data on the agenda in the UK today. Some more consolidation near EUR/GBP 0.90 might be on the cards. We don’t anticipate a sustained sterling rebound as long as there is no breakthrough on one of the key brexit issues.
EUR/USD: dollar going nowhere. Will payrolls give clear guidance?
