US Labour Data Comes in Strong

Yesterdays US labour data release, UK and Europe data released this morning, and unusual price action for Japan.

Disappointment on the street yesterday afternoon with the release of more strong US labour data, the JOLTS figure coming in higher than expected, printing 9.61m vs 8.815m forecast. The result, a continuation of the recent dollar and US bond trend, the 30-year Treasury yield broke 5% for the first time since 2007.

Albeit, to early to call what effect it may have on the market, Kevin McCarthy, the House of Representatives Speaker was ousted by members of his own party. A sect of hardline republicans defected on a vote of no confidence after McCarthy struck a deal with Senate Democrats to fund government agencies.

EU & UK

Eurozone, UK and US Services PMI data will be released this morning. As discussed earlier in the week, the UK services PMI will be highly scrutinised. A larger than expected decline in the UK services sector will highlight the contrast in US/UK economic performance and maintain pressure on the pound.

Positive European services data may help prop up EURUSD which traded near nine-month lows yesterday. A weekly close below 1.0530 is suggested to add to the recent directional bias and lead to further selling off, bringing parity fears into play.

Elsewhere

Unusual price action on JPY saw USDJPY whip off the highs of ~150, dropping as low as ~147.50 before recovering to 149, leading to speculation that the BOJ, on behalf of the MOF, were intervening to provide support to the currency, the MOF declined to comment on intervention questioning.

The RBNZ held the key rate at 5.50%, and reiterated the current central banker party line of “rates may have to remain restrictive for longer”, they don’t see inflation returning to target until at least H2 2024. The market read was dovish and USDNZD has weakened off the back of the announcement.