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The improving US labour market raises the prospect of earlier hikes from the US Fed; Sweden slices their official rate

Currencies
The improving US labour market raises the prospect of earlier hikes from the US Fed; Sweden slices their official rate

by Kymberly Martin

NZ Dollar

After a fair amount of volatility over the past 24-hours the NZD/USD sits a little lower this morning, at 0.8750.

In the absence of domestic data releases, a toll was taken on the NZD/USD after the soft AU retail sales release yesterday afternoon

However, the ever-resilient NZD/USD soon recovered from this upset to trade around 0.8770 heading into the US payrolls release early this morning.

The positive US data surprise, saw the NZD/USD plunge to below 0.8720. However, it has clawed its way back from the abyss to trade around 0.8750 this morning.

There was volatility on most crosses overnight, though direction was most notable on the NZD/AUD cross.

After the AU retails sales report the cross popped from 0.9290 to 0.9320. It then crept steadily higher overnight to trade at 0.9360 currently. Resistance is now eyed at the early May highs around 0.9390.

It looks to be a quiet end to the week with no data scheduled locally and the US celebrating Independence Day holiday tonight.

We see NZD/USD support at overnight lows around 0.8720.

Resistance will be encountered approaching 0.8800.

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Majors

The USD strengthened after a strong US payrolls report overnight. The SEK and AUD were the weakest performers over the past 24-hours.

Last night was all about the US payrolls report. June non-farm payrolls came in at 262k (215k expected). In addition, the previous month was revised up to 224k from 216k. The US unemployment rate also fell to 6.1% (6.3% expected). The improving labour market raises the prospect of earlier hikes from the US Fed, although Fed Fund futures still price a first hike around mid-next year. However, the Fed may cling to the fact there are still few signs of wage growth in order to push back on rate hike expectations.

After the release, equities on both sides of the Atlantic put in solid performances. The Euro Stoxx 50 closed up 1.1% and the S&P500 up 0.55%. The USD index gapped higher from around 80.00, to above 80.30, before drifting off to 80.20 currently.

The EUR and JPY abruptly gapped lower after the US data release. Early in the evening the EUR had shown no response at all to the ECB non-announcement. The Bank kept policy unchanged as expected. However, after the payrolls release, the EUR/USD dropped from around 1.3650 to sit below 1.36010 this morning.

However, the biggest currency move overnight was seen in the SEK. Sweden’s Riksbank surprised the market by cutting its key interest rate to 0.25% from 0.75%. Consensus had expected the repo rate to be lowered to 0.50%. On the result the USD/SEK lurched higher. It currently sits 1.7% higher than yesterday morning, at 6.8240.

The AUD was the other key underperformer over the past 24-hours. A toll was initially taken on the currency after a week May AU retail sales release (-0.5% vs. 0.0% expected) yesterday afternoon. It received a further knock lower after the US payrolls release, to sit at 0.9350 this morning.

It promises to be a quiet end to the week with the US celebrating Independence Day Holiday and little on the data agenda elsewhere. German factory orders will be released tonight.

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Source: CoinDesk

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