The Week That Was…
Forex markets remained range-bound this week heading into the headline US Non Farm Payrolls and Unemployment Rate on Friday. The data came in weaker than expected marking the fourth consecutive miss with a print of 142k vs 202k expected, sharply down from last month’s low print of 173k, which has actually been revised lower to 138k.
Market reaction was swift in selling USD across the board with the majors all rallying against the Dollar with the exception of AUD which quickly conceded initial reaction gains as global risk sentiment tumbled on the data release with equity markets falling in reaction to the news.
The only positive data was the unemployment rate which remained unchanged at 5.1% but overall, this was a particularly poor set of data and has seen players pushing out expectations for a Fed lift-off from December 2015 to March 2016 with many now starting to question if the next move we see will still be to tighten.
- USD Traded sharply lower following the disappointing NFP data which saw a swift move by markets to begin pricing out a Decembr lift-off with focus now turning toward a March 2016 date. CME Fed Watch now shows only a 25% probability of a lift off in December.However, losses were reversed into the close as USD was strongly bid.
- EUR The Euro was sharply higher following the NFP as risk sentiment saw the Euro supported via its inverse risk correlation as equity markets fell into the NY open, however gains were quickly reversed over the American session on Friday. Inflation data midweek showed the EuroZone had dipped into deflation printing -0.1% in September, with German CPI similarly showing a -0.2% reading, leading players to anticipate further ECB easing in the coming months.
- GBP Weaker PMI data saw GBP trading lower over the week, shrugging off encouragement from better lending and mortgage approvals data. The post NFP USD weakness saw GBP trade back up into 1.52 before stalling and reversing, Growth concerns are now plaguing the UK economy once more with investors pushing out expectations of a UK rate hike. Attention will be fixed on the BOE on Thursday which is expected to see the Central Bank striking a Dovish tone.
- JPY USDJPY finally broke out of the triangular range it has held since August 24th only to reverse and close back inside the range. No September rate hike from the Fed and a very weak September Jobs report is increasing pressure on the BOJ to increase stimulus.
- AUD The Aussie had recovered some ground in the week as risk sentiment improved following better Chinese data early in the week. Pressure is mounting on the RBA to ease further in the absence of a US rate hike and with expectations pushed further out following Friday’s weak NFP data. The RBA rate decision this week is expected to see the RBA on hold with risks skewed towards a further rate reduction.
- CAD The Canadian Dollar was stronger this week due in part to better domestic data by way of consensus GDP data and a slight rebound in oil prices. A stabilisation in Chinese data this week also saw commodities firmer.