Written by Convera’s Market Insights team
Global overview
The greenback was hit lower on Friday after the US jobs report produced a rare miss. The jobs number compounded the pressure on an already weakening USD after the Federal Reserve produced a more cautious assessment of the US economy last week. This week, all eyes are on the Reserve Bank of Australia decision, due on Tuesday.
Greenback lower after US jobs miss expectations
The US dollar tumbled on Friday night after the key US non-farm employment report missed expectations for only the third time since April 2022.
The October jobs report found 150k jobs were added to the US economy – well below the 180k expected. The unemployment rate climbed from 3.8% to 3.9% while wages growth also slowed.
After last week’s Federal Reserve meeting suggested the US central bank was near an end to its rate-hiking cycle, the jobs news added renewed pressure to the US dollar.
The news sent the greenback sharply lower with the USD index down 1.0% and falling to the lowest level since 20 September.
The AUD/USD jumped 1.1% to hit the highest level in two months.
The NZD/USD jumped 1.6% to hit three-week highs.
The USD/SGD fell 0.8% while the USD/CNY fell 0.2%.
Manufacturing data also hits USD
The US jobs number wasn’t the only miss from the US economy last week. The ISM manufacturing PMI came in at 46.7 versus the 49.0 expected.
This is a significant miss for the manufacturing sector that might cause markets to rethink how quickly the US economy is slowing down. The print seemed to be inconsistent with the S&P figure, which indicated that manufacturing was once again expanding. Even while we don’t believe this will be enough to spark the stagflation story again, it might be used in conjunction with the recent movement of stock prices to indicate an impending recession.
Since October 2022, ISM Manufacturing has been in contraction zone, and earlier this year, the sector saw worse numbers. Again, this data weighed on the US dollar, with the slowing US economy meaning the US Fed has less reason to hike.
BoJ stays on hold
After a volatile session in the USD/JPY following last week’s Bank of Japan decision, what has to happen for yen to really shift?
Given the narrative of the theme of US exceptionalism, the US side is most likely to continue to be significant. And not much of the most recent statistics can refute it. Prior to the January meeting, when the next Outlook Report will be released, the Japan side may become more intriguing.
Due in part to the prolonged depreciation of the yen, inflation indicators are still holding up better than the BoJ had anticipated, and its estimates continue to appear much too low, essentially anticipating a quick return to 2018/19 inflation.
More anticipation of the removal of negative rates and the reduction of quantitative easing would have a much greater effect than the current yield curve control adjustments.
Aussie at two-month highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 6 – 11 November
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
