sign up log in
Want to go ad-free? Find out how, here.

Currency markets punish the USD on jobs report, thinking Fed will push back hike plans. But reaction 'difficult to justify'

Currencies
Currency markets punish the USD on jobs report, thinking Fed will push back hike plans. But reaction 'difficult to justify'

By Kymberly Martin

NZ Dollar

The NZD/USD closed the week higher, at 0.7750, after the USD weakened in response to the US labour market report.

In the absence of domestic data releases, the NZD/USD had traded sideways, to slightly lower during the day on Friday. The market was generally reticent ahead of the long-awaited US payrolls report.

However, the NZD, along with the AUD and CAD were key beneficiaries of the ensuing USD weakness.

From around 0.7680, the NZD/USD pushed up to end the week at 0.7750.

This takes the NZD/USD back above the crucial 0.7700 level. Still, momentum in the NZD remains clearly negative.

The USD will need to broadly fall from favour if the NZD is to maintain any sort of rebound.

This would seem unjustified on the basis of the US payrolls report alone. In fact, given the US unemployment rate has now fallen to 5.8%, it is difficult to justify the market pushing back its expectations for Fed hikes any further.

The market’s expectation the Fed will not hike until late 2015, already seems quite a stretch.

It is a quiet start to the week locally. There are no specific domestic data releases today, although the REINZ housing report is due any day. NZD/USD support is seen at 0.7700. Resistance is eyed at 0.7790.

----------------------------------------------------------

To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.

Email:   

----------------------------------------------------------

Majors

The USD was broadly weaker, post the US payrolls release. The AUD, CAD and NZD outperformed.

Most currencies tracked tight ranges ahead of the much anticipated, but ultimately softer-than-expected, US labour market report (see Fixed Interest).Currencies then launched into action. A period of immediate volatility settled into broad USD weakness. The USD index closed the week at 87.60, 0.7% below intra-night highs.

Partly reflecting the weaker USD, commodities enjoyed a bit of a rebound on Friday night. The WTI oil priced closed up 1%, at $US78.6/barrel, while gold closed up 3.2%. Equities were a little more nonplussed. The S&P500 closed flat, while the Euro Stoxx 50 closed down 1.2%.

“Commodity-linked” currencies (AUD, CAD and NZD) appeared to be the winners on the night. The AUD/USD pushed up from early evening lows around 0.8540, to end the week just below 0.8640.

Over the weekend, China released its trade balance data for October. This was slightly stronger than expected at $45.4b, due to stronger than expected exports, against slightly softer than expected imports. While this sends a positive signal on global growth more broadly, it may not necessarily be a positive sign of demand for AU exports.

The GBP made the most modest gains relative to the USD on Friday night. It was on the back foot from early in the night, after the September UK trade balance was shown to be more negative than expected. However, post-US payrolls the GBP/USD managed to rebound off its lows to end the week at 1.5870.

It looks to be a relatively quiet start to the global data week. AU housing finance approvals will be released today along with China CPI and PPI. Tonight, only Italian industrial production data is due along with Canadian housing starts.

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

All its research is available here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.