Daily Market Pulse

NFP released today


A big week of economic events culminates this morning with the release of U.S. Non-Farm Payroll for August. 1.371 million jobs were added in August, slightly down from July’s 1.763 million and below the expectation of 1.4 million. The unemployment rate is expected to drop to 9.9%, down from 10.2%. Looking back this week at data already released, ADP was disappointing with just a growth of 428,000, and though ISM Manufacturing rose it only came in at 46.4, still in economic contraction. The good news yesterday was jobless claims came in lower than expected at 881,000, lower than the expected 950,000. The markets are also digesting the correction in the US equity markets yesterday. The DOW fell more than 800 points, the biggest one-day decline since June and the NASDAQ and S&P fell as well. A momentary correction or a new trend? That’s the big question. The USD had a quiet trading night against the major currencies as traders took a break ahead of today’s release and ahead of the 3-day U.S. holiday. Concerns remain about the U.S. economy amid speculation the Federal Reserve will keep interest rates low for an extended period. U.S. Treasury yields are higher this morning after the fall of equity markets yesterday. The yield on the 10-year note rose to 0.64%, while the 30-year bond rose to 1.36%. 


EUR/USD traded in a very quiet range overnight. Technically, the 100-day moving average crossed the 200-day moving average, but the reaction was quiet, as RSI remained in the 50’s most of the evening. It is currently at 52. There is strong resistance that would need to be broken to resume an upside move and after this week’s pricing action, momentum is to the downside. While the focus remains on the U.S., not all is well in Europe as Germany's factory orders disappointed with a meager rise of 2.8% in July. The miss on expectations joins Thursday's report of a 1.3% drop in the Eurozone’s retail sales. Adding to that, Coronavirus cases continue rising in Spain and France, with both major countries considering extending the furlough scheme that kept workers attached to their jobs. Lastly, The European Central Bank has been weighing on the common currency with comments earlier this week by Philip Lane, the ECB's Chief Economists, saying he is watching the exchange rate. Later, in the week, an article in the Financial Times cited unnamed officials expressing concern about the appreciation of the euro. The ECB announces its rate decision next week and investors may refocus on these reports at some point, but probably only after the dust settles from the NFP. 


GBP/USD also traded quietly overnight, as traders await the NFP release. Technical momentum remains to the downside, as the 100 and 200-day moving average converge, and support levels are expected to be tested. RSI is neutral at the 55-level. While markets look to the US for economic releases, the pound has its own problems. Leeds, a large northeastern city, is facing lockdown amid an increase in coronavirus cases. While the UK's virus situation is much improved in comparison to the worst of the crisis, it is not out of the woods yet. Brexit talks remain deadlocked and there is also little progress in preparations for the day after the transition period ends. Concerns about the state of customs may also weigh on the pound. Apart from Brexit, there is another problem facing the pound; the expiry of the furlough scheme in October. It seems that the government would like to extend it, yet may have to raise taxes. Investors and the public are unhappy with the miserable choices. The Treasury paid most of the salaries of workers that were unable to work due to the crisis, keeping them attached to employers and holding a lid on the unemployment rate at only 3.9% as of June. Rishi Sunak, Chancellor of the Exchequer, briefed fellow Conservative Party members of "difficult times” earlier this week and officials at the Bank of England echoed that message by warning of a long recovery path. The pound may remain under pressure.


USD/JPY also trading in a small range overnight, with all three moving averages, converging. USD/JPY could move higher as risk-on trading would eliminate safe-haven trades. RSI is currently at 49, and if the 50-day moving average moves bow the 100 and 200-day as it looks to be preparing to do, the currency pair could move higher. The Bank of Japan (BOJ) is reportedly considering upgrading its economic assessment on expectations of a rebound in the Japanese economy after the sharp contraction in Q2, Bloomberg reported. According to the reports, any changes would acknowledge that the slump has bottomed, rather than indicate optimism surrounding the outlook of the economy. BOJ policymakers still believe that the economic situation remains severe and highly uncertain amid the fallout from the coronavirus pandemic. Traders will focus on the next BOJ monetary policy meeting is scheduled on September 17, where it will publish its quarterly economic outlook report.


USD/CAD is trading lower this morning, having moved in the direction in early European trading. 100 and 200-day moving averages have met and the downside move could accelerate if the moving averages cross. RSI which had been in the 50-area most of the overnight has now dropped to 36. The move in the USD/CAD is not being driven by oil prices, as Brent crude fell $0.19 to $43.88 per barrel, as the commodity is headed towards its biggest loss since June. U.S. West Texas Intermediate was also lower, down, $0.20 to $41.17 per barrel, and is set to show a loss for the first time in five weeks. While most of the trader’s focus is on US NFP, Canada will also report employment and unemployment numbers. The Canadian Unemployment Rate is expected to fall to 10.1% from 10.9% last month, while the Net Change in Employment could drop to 275,000K from 418,500 previously. The worst may be over, but when will things get back to normal? Canada has restored around 1.66 million jobs in the past three months, 55% of around three million lost positions in March and April. While unemployment should come in at 10.1%, a number below the 10% level would be positive for the loonie and could see the currency add further gains. Conversely, an unemployment release of 11% or higher, could weigh on the Canadian Dollar.


More front-line workers have died of COVID-19 in Mexico and the United States than any other nation, according to a report by Amnesty International Thursday. Amnesty's report said at least 7,000 health workers worldwide have died so far, with Mexico and the United States combining to account for nearly one-third of that total. The report cites about 1,300 front-line worker deaths in Mexico and 1,100 in the United States. The nations with the next-highest tolls are Britain (649), Brazil (634), Russia (631), and India (573). "For over seven thousand people to die while trying to save others is a crisis on a staggering scale," Amnesty International Head of Economic and Social Justice Steve Cockburn said in a statement. "Every health worker has the right to be safe at work, and it is a scandal that so many are paying the ultimate price.” Cockburn called for "global cooperation to ensure all health workers are provided with adequate protective equipment, so they can continue their vital work without risking their own lives." The human rights organization said many of the deaths in Mexico were among hospital cleaners, who are especially vulnerable to infection due to a lack of protective gear. The Mexican government has insisted for months that hospital workers have enough protective equipment, but medics have staged several protests in Mexico City to display what they called substandard gear.


Speaking at an event marking the anniversary of Japan’s formal surrender in the Second World War, China’s President Xi Jinping commented that Beijing will never accept foreign interference.  He added that “the Chinese people will never allow any individual or any force to separate the Chinese Communist Party and the Chinese people, and to pitch them against each other.” An official at China’s Commerce Ministry said on Friday, the country’s consumption market will maintain a stabilizing and improving trend.  The official said that he expects consumption growth to accelerate in September. US-China tensions continue and Bloomberg News has reported that “China is planning a sweeping set of new government policies to develop its domestic semiconductor industry and counter recent Trump administration restrictions.”


Brazil is among the six South American countries that started this week with the transmission of coronavirus under control, according to calculations by Imperial College, a reference in epidemic monitoring. The Brazilian transmission rate (Rt) estimated by the British epidemic monitoring center is the lowest since the end of April. The index is now 0.94, which means that every 100 infected people pass the coronavirus to another 94, who, in turn, transmit the disease to another 88, progressively reducing the disease's scope. Peru and Bolivia (both with 0.88), Colombia (0.92), Ecuador (0.94), and Chile (0.97) are also among the group of South Americans who see the transmission slowing. Of these, Chile has recorded the most favorable rates for the longest time as this is the tenth consecutive week in which the Chilean Rt does not rise above 1. Venezuela (1.06), Argentina (1.09), and Paraguay (1.32) registered an acceleration of contagion, according to Imperial College calculations, based on the number of reported deaths. Despite the good news, the World Health Organization arm said on Wednesday that countries cannot relax their surveillance and must remain vigilant.


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