Another negative session on Wall St on Friday saw the NASDAQ close -1.4%, while the S&P 500 finished the day -.6%. U.S yields continued to push higher with the 10-year gaining 10bps to 3.14% and oil gained 2% to finish the week above $110 a barrel. In currency markets, the USD remained well supported which saw the AUD/USD close at .7074 after earlier trading to a low of .7059.
Asian equities were largely down on the close with the Hang Seng the worst performer down 3.85%, the Nikkei was the outlier up 0.7%. The ASX fell 2.2% on Friday’s close in a broad-based sell-off, its worse session since Russia attacked Ukraine. AUD/USD finished the session at 0.7064 lows, falling from 0.7132 highs. GBP/USD dropped to a two-year low, the lowest since June 2020. European equities opened in the red with Euro Stoxx 50 down 1.1% and FTSE100 -0.5%. 10-year UST yields advanced 3bp to 3.6%. Brent crude rose 0.7% to $111.68 a barrel.
Ahead of the US employment report, AUDUSD rebounded slightly from lows of 0.70645 to 0.7100. NZD/USD made its way back towards Asian highs from 0.63965 lows. GBP/USD followed suit climbing back from 1.2276 lows to 1.2363. USD/JPY edged lower to 130.39 from 130.80 highs. USD/CAD traded beneath 1.2820. US Non-Farm Payrolls for April rose by 428k against expectations of 380k with net revisions over the prior 2 months at -39k. The US unemployment rate was steady at 3.6% against expectations of a fall to 3.5% with the result worsened by the participation rate unexpectedly falling from 64.4% to 62.2% compared to expectations of an increase to 62.5%. Finally, average hourly earnings rose 0.3% MoM compared to expectations of 0.4% though was 5.5% YoY as expected. In response to the data, US futures pushed into positive territory and yields fell. AUD/USD pushing up around 30 points to briefly touch 0.7135 highs while NZD/USD moved up to 0.6453 highs. More limited gains across the other majors.
Conditions were more subdued over the NY Afternoon though the USD remained generally bid as the week drew to a close with NZD/USD down to new lows under 0.6400 while USD/CAD moved up through 1.2900 to hit highs of 1.2912. The moves partially reversed in late trade with the local unit closing near 0.7080 and other majors generally closing somewhere near the middle of their respective daily ranges.
A relatively quiet week of economic releases ahead where U.S. and Chinese inflation data on Wednesday look set to dominate investor interest. Besides the data release from the U.S, several FOMC participants will be making public remarks throughout the week and may remark on the 4-May decision and the policy outlook. Most notable will be those from voting members Williams (FRBNY), Waller (Governor), Bullard (FRB St. Louis), and Mester (FRB Cleveland).
China’s trade data is the key event today. The lockdown throughout April is likely to take a toll on trade. Exports could soften on lockdown - the three provinces of Shanghai, Jiangsu and Zhejiang accounts for 1/3 of China’s exports. Logistics disruptions could weigh on trade in other regions too. That said, markets believe the worst could be behind us, and logistics disruptions are easing. China’s exports could have some snapback once lockdown is lifted.
The AUD/USD remained under heavy pressure, and it closed at the lower end of its .7059/.7135 range. Demand remains ahead of the psychological .70c level while offering interest should emerge as we approach .72c.
• JP – BOJ Minutes of March Meeting
• EU – May Investor Confidence • CA – Mar Building Permits m/m