Olivia

Summary May's downshift in hiring to its slowest pace in more than a year still leaves payrolls rising at a robust pace. Employers topped consensus expectations with 390K new jobs. The ongoing solid pace of hiring has been fueled not only by sky-high demand but by more workers returning to the labor force. The labor force participation rate rebounded a tick in May, helping to keep the unemployment rate steady at 3.6% and wages from accelerating further. Today's report lands in a sweet spot for the Fed. While the labor market remains clearly tight and is adding to inflationary pressures, improving labor supply is helping ease the upward pressure on wages while still allowing more workers to gain employment. But there is a long way to go before restoring the balance to the jobs market that will be needed for the Fed to win the battle on inflation, keeping the FOMC on track to tighten monetary policy aggressively at its next few meetings. Job growth mostly broad-based Nonfarm payrolls rose by 390K in May, down slightly from April's 436K pace. The ongoing employment recovery in leisure & hospitality continued with 84K net new jobs added in the month, led by… Read More »May employment: Sweet spot for the Fed

As the Biden administration scrambles to try to contain inflation – or at least make a public relations show of it – precious metals investors are wondering how much longer gold and silver prices will remain contained. Metals markets got a bit of a lift this week through Thursday but have pulled back a bit here today. As of this Friday recording, gold is flat for the week now to trade at $1,860 per ounce. And silver is down 20 cents or 0.9% this week to trade at $22.12 an ounce.    Turning to the platinum group metals, platinum is this week’s standout performer with a robust 7.7% advance to come in at $1,039. And finally, palladium prices are down 1.9% to trade at $2,039 per ounce. While precious metals are showing some signs of emerging strength here, they remain depressed compared to other raw materials. Gasoline prices, for example, are setting record after record across the country. On Thursday, the national average hit $4.72 a gallon. In California, it’s now over $6.00. Consumers who are frustrated with skyrocketing costs for fuel, food, and other essentials are giving President Joe Biden poor marks for his handling of the economy. The… Read More »Weekly market wrap

Euro area inflation once again exceeded expectations in May, sparking further speculation of faster ECB rate hikes. With core inflation rising to 3.8% y/y and seasonally adjusted m/m rate still around 0.5%, we now expect core inflation to peak only after the summer. Consequently, we have lifted our expectations for ECB rate hikes ahead of next Thursday’s meeting, and now look for 25bp hikes in every meeting from July to March (which would bring the deposit rate to 1.00%). Next week’s meeting will likely mark the formal end to ECB’s net asset purchases, and the focus will be on the possibility of 50bp rate hikes in the coming meetings, as markets are pricing in around 30% risk of such a hike in July. Read our full ECB Preview – Ready for lift-off, 2 June. Today, we published Big Picture: A (mild) recession in western economies seems unavoidable, 3 June, with our latest economic forecasts. We now expect US economy to fall into a mild recession during H1 2023, with euro area following suit in H2 2023. The combination of weakening real purchasing power and tighter financial conditions will weigh on economic growth, even though pent-up demand, savings and the re-opening… Read More »Weekly Focus: ECB preparing for a lift-off in July

Summary United States: Economic Storm Clouds or Just a Brisk Inflationary Headwind? Nonfarm payroll growth exceeded expectations in May, with employers adding 390,000 jobs. The unemployment rate was unchanged at 3.6%, but labor force growth edged higher and wages rose only modestly. Most of this week's other reports also came in above expectations, with the ISM manufacturing index rising 0.7 points to 56.1 and factory orders posting solid, broad-based gains. Next week: Trade Balance (Tues), CPI (Fri), U. of Mich. Sentiment (Fri) International: Hawkish Hike from the Bank of Canada, Mixed Data in the Emerging Markets The Bank of Canada delivered a 50 bps policy rate hike to 1.50%, and the accompanying statement was more hawkish than market participants expected. In emerging markets, data from China this week suggest the worst may be behind, as May PMI data revealed a modest uptick in sentiment. While China's economy is showing tentative signs of stabilization, Brazil is showing signs that activity is decelerating. Next week: European Central Bank (Thurs), Mexico Inflation (Thurs), Brazil Inflation (Thurs) Credit Market Insights: Federal Student Loans Brought to the Forefront Again On Wednesday, the Federal Department of Education announced that it will discharge $5.8B in federal student… Read More »Weekly economic and financial commentary

EUR/USD from yesterday's  long 1.0642 to target 1.0795. EUR/USD achieved highs so far at 1.0764 or +122 pips. EUR/USD for NFP could easily trade to 1.0801 and 1.0807 then short to target 1.0752 and break targets 1.0720's. Once EUR/USD achieves it highs then short for the day is the way to trade. EUR/USD close today could easily achieve 1.0720's and not a good location for next week's longs or shorts as next week would begin at fairly dead neutral. Same story as last week when EUR/USD opened at 1.0734. EUR/USD overall support is derived from  deeply oversold EUR/CHF, EUR/CAD and EUR/AUD yet overbought to EUR/JPY and EUR/GBP. EUR/USD big break for higher is now located at 1.0830 and a continued rise to all averages. Break higher from 1.0830 targets easily 1.0933 then 1.0984. The EUR/USD long side prevails next week. USD/JPY rose from 114.00's to 131.00's. At current 129.00's and 130.00's, USD/JPY trades at the top of the range and deeply overbought short, medium and long term. USD/JPY should trade today to easily 129.28. GBP/JPY overall range is located from, 148.00's to 168.00's. At 163.00's, GBP/JPY trade near its range top. Good target today is 162.85 from short 163.87. NZD/USD's… Read More »Currency market: EUR/USD and FX next week

EUR/USD from yesterday's  long 1.0642 to target 1.0795. EUR/USD achieved highs so far at 1.0764 or +122 pips. EUR/USD for NFP could easily trade to 1.0801 and 1.0807 then short to target 1.0752 and break targets 1.0720's. Once EUR/USD achieves it highs then short for the day is the way to trade. EUR/USD close today could easily achieve 1.0720's and not a good location for next week's longs or shorts as next week would begin at fairly dead neutral. Same story as last week when EUR/USD opened at 1.0734. EUR/USD overall support is derived from  deeply oversold EUR/CHF, EUR/CAD and EUR/AUD yet overbought to EUR/JPY and EUR/GBP. EUR/USD big break for higher is now located at 1.0830 and a continued rise to all averages. Break higher from 1.0830 targets easily 1.0933 then 1.0984. The EUR/USD long side prevails next week. USD/JPY rose from 114.00's to 131.00's. At current 129.00's and 130.00's, USD/JPY trades at the top of the range and deeply overbought short, medium and long term. USD/JPY should trade today to easily 129.28. GBP/JPY overall range is located from, 148.00's to 168.00's. At 163.00's, GBP/JPY trade near its range top. Good target today is 162.85 from short 163.87. NZD/USD's… Read More »Currency market: EUR/USD and FX next week

The European Central Bank is set to flag its first rate hike in more than a decade this week, while the Reserve Bank of Australia might step on the brakes harder. But as the laggards of the central bank world finally get their stakes on when it comes to tightening policy, investors will be on the lookout for more evidence that inflation may already be peaking in the United States. China’s economy will be in the spotlight too as trade and inflation readings are due as growth fears persist even after the easing of Shanghai’s lockdown.

The US reported better than expected job gains but slower monthly wage increases in May.  Signs of growing labor supply and falling pay may ease the path of Fed rate hikes.  The dollar may swing back down when the dust settles. Two months of weaker than expected wage increases in a row – is the most important thing for the Federal Reserve, which is fighting inflation. The rest is less important. The US gained 390,000 jobs in May, better than 328,000 expected, but on top of downward revisions. Real expectations stood at lower levels after the ADP data, and that helps explain the stronger dollar reaction.  However, Average Hourly Earnings advanced by only 0.3% in May, worse than the 0.4% projected and after another weak increase in April. Slower increases in salaries mean lower price pressures on inflation that the Federal Reserve can influence – the demand side. It cannot impact global and energy prices.  Moreover, yearly wage growth has slowed to 5.2% from 5.5$. While that fully met economists' expectations, it still reflects a deceleration. If peak inflation is in sight – or even in the rearview mirror – the Fed may halt its cycle of rate hikes, and… Read More »NFP Analysis: Peak inflation is peeking from the clouds, dollar set to fall

Gold Price retreated ahead of the weekend amid renewed dollar strength. 10-year US Treasury bond yield closes in on 3% after upbeat US jobs report. Next week's ECB meeting and US inflation report could ramp up XAUUSD volatility.  Gold Price erased a portion of its weekly gains on Friday as US Treasury bond yields gained traction on the better-than-expected labor market data. XAUUSD remains on track to close the third straight week higher but the recent price action suggests that the pair could find it difficult to make a decisive move in either direction unless it breaks out of the $1,840-$1875 range. US yields push higher after US data  The monthly data published by the US Bureau of Labor Statistics revealed on Friday that Nonfarm Payrolls in the US rose by 390,000 in May. This reading surpassed the market forecast of 325,000. Additionally, April's print of 428,000 got revised higher to 436,000. Further details of the report showed that the Labor Force Participation Rate improved to 62.3% as expected and the annual wage inflation edged lower to 5.2%, matching analysts' estimates. The benchmark 10-year US Treasury bond yield pushed higher toward 3% with the initial reaction to the upbeat jobs… Read More »Gold Price defines breakout levels ahead of ECB meeting, US CPI

EUR/USD: Europe’s single currency staged an impressive rebound against its US counterpart on Thursday. US equities also rose, with the US Dollar Index (USDX) exploring lower territory, consequently underpinning the EUR/USD (0.9 per cent). Technically, we’re at an interesting juncture on the higher timeframes. In a market decisively trending lower since 2021, weekly Quasimodo support-turned resistance at $1.0778 is being tested. Though on the other side of the fence, price action on the daily timeframe rebounded from support at $1.0638. This places light on an ascending support-turned resistance, drawn from the low $1.0340. Also of particular relevance on the daily chart is the relative strength index (RSI) retesting (and holding) its 50.00 centreline, echoing the possibility of support. Out of the lower timeframes, H4 price rebounded from supply-turned demand from $1.0655-1.0632, alongside the H1 timeframe rebounded from a bullish AB=CD formation which dovetailed with a Quasimodo resistance-turned support at $1.0631 as well as a number of nearby Fibonacci ratios. Overhead, H4 resistance is at $1.0758 and H1 resistance can be seen at $1.0762. With weekly resistance ($1.0778) active, as well as the trend clearly favouring lower prices, and H1/H4 price nearing resistance at $1.0762-1.0758, a bearish scene could unfold from… Read More »Technical View Ahead of US Employment