A Slow Day in the Markets after Friday’s Payrolls Report

Analisi Giornaliera - 10/08/2015


On Friday's close, the US equity markets were trading lower as the July non-farm payrolls did not meet expectations. Although not a stellar report, the July jobs report showed that the US economy could be strong enough to sustain the rate hikes.

US Equity Markets Fall as Traders Look to September Rate Hikes

While missing estimates for the month, the US economy was shown to have added 215k new jobs in July. The previous two jobs reports were also revised higher, averaging over 200k for monthly job gains, a trend that has been intact for most of this year and one that is seen as the impetus behind the Fed’s decision to hike rates in September, despite a sluggish inflation report. Traders now expect to see the Federal Reserve hike rates in September, though there is one more jobs report ahead of the decision. The S&P500 was down 1.25% on Friday's as the index briefly tested the lows below 2067.4 before settling to close at 2073.25.


BoJ Leaves Policy Unchanged

Earlier on Friday, the Bank of Japan released its monetary policy statement and refrained from making any major policy changes. The BoJ's qualitative and quantitiative easing remains unchanged at 80 trillion yen ($640 billion). The inaction was widely expected as many economists polled were of the opinion that the BoJ would leave policy unchanged at the July meeting. BoJ officials were seen to assess the impact of the first contraction in the Japanese economy. BoJ Governor Kuroda brushed aside concerns, noting that the last quarter's weakness was only temporary while staying confident that inflation would reach the 2% target by 2016. The Yen remained muted to the BoJ's inaction. USDJPY closed Friday’s session on a bearish note after opening the day at 124.725 and closing at 124.207. USDJPY erased most of the NFP led gains.


CAD Muted Despite Broadly Positive Data

The USDCAD closed Friday on a softly higher note, on some encouraging data from Canada. While the Canadian jobs report matched expectations, the unemployment rate remained unchanged at 6.8%. Building permits for the month grew at a strong pace of 14.8%, up from -13.9% declines seen a month ago and beat estimates. The Canadian Ivey PMI also posted a reading of 52.9, beating predictions, but was seen to be weaker from the previous month's PMI reading of 55.9. The Canadian Dollar was down overall and tracked the Crude Oil prices which came under renewed bearish pressure since last week, as the supply glut concerns continue to remain elevated alongside the expectations of Iran’s Crude oil exports also hitting the markets.


A Quiet Day in the Markets Today

After the high impact news events from last week, the currency markets will likely take a break as today's economic calendar is relatively light with no major economic releases for the most part. The US trading session will see Fed Members, Fischer and Lockhart speak, and the markets could look to the views from these Fed members while weighing their options. The speeches come after Friday's jobs report, so the markets are likely to scrutinize the Fed speeches to get a glimpse into how the Federal Reserve members view the July nonfarm payrolls report. Dennis Lockhart has been particularly hawkish in recent times and reiterated that only a significant decline in the US economy would stop the Fed from hiking rates this year. Expect to see some kind of volatility in the markets during the Fed member speeches. EURUSD closed Friday in the Green, settling for 1.095 at Friday’s close. The Single currency has now posted three straight days of gains but remains under pressure as the currency is set to attack the 1.10 psychological level.


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