The Morning Update

Friday May 3rd, 2024

Written by:
Paul Harrison

The USD is flat, oil prices are firm, equity markets are up, and US yields rise ahead of today's key US Jobs data. The USD index stalled after three days of losses, while equity markets gained after Apple's earnings beat expectations, helping boost the tech sector. The US nonfarm payrolls number will be the main focus for investors, with expectations of a gain of 240k jobs, which would be the weakest since November. Elsewhere, oil prices firmed in early trading but are set for their steepest weekly drop in three months. Bitcoin rallies off its 3-month lows, up nearly 1% today. The focus will be on US Nonfarm Payroll, Average Hourly Earnings, unemployment rate, and ISM Services PMI to provide intraday direction to currency markets today.

In other news. Hamas leader says examining Gaza ceasefire proposal in 'positive spirit'. Apple unveils record $110 billion buyback as results beat low expectations. The UK's Labour Party claims a big early win over PM Sunak's Conservatives in local elections. Turkey halts trade with Israel over Gaza conflict. The US readies sanctions over Russian petroleum supplies to North Korea. Italy can seize ancient statue in the US, the European court says. After prices surge, UK households cut back on beer, meat, and domestic appliances. Sony and Apollo propose a $26 billion deal for Paramount Global. Turkey's inflation accelerates to nearly 70% in April.

In currency markets. The Japanese Yen is poised for its best week of gains in over a year, rallying from 158.01 to 153.25 heading into the US jobs report G10 currencies hold on to small gains, while Asian currencies remain under pressure ahead of the Nonfarm payrolls. CNY eases 0.1%, while Asian currencies are up 0.1% on average vs USD. Trading currencies primarily positive, with MXN & ZAR flat, AUD & SEK up 0.2%, JPY, CHF & NZD gaining 0.3%, NOK strengthening 0.5%, and IDR rallying 0.6% vs USD.

In commodity markets. Oil & Natural Gas prices are up 0.2%, Gold prices are flat, Silver prices slipped by 0.2%, Copper prices gained by 0.6%, Wheat prices rallied by 1.3%, and Soybean prices strengthened by 0.45%.

CAD stalls after two days of gains as investors await the US jobs data. The loonie has benefited from improving risk-on sentiment and weakening USD; with the prospect of a BoC cut as early as June, the CAD gains will be limited vs the USD and its G7 peers. David Rosenberg, President of Rosenberg Research, said, "I think that the Canadian economy is flat on its back." the Canadian economy has slowed more than enough to justify an interest rate cut by the Bank of Canada. Underlying inflation may be lower than the central bank thinks. BoC Governor Macklem told the House of Commons finance committee yesterday that there is a limit to how far the US & CAD interest rates can diverge, but "certainly we're not close to that limit." With no CAD economic releases today, investors will be focused on the US jobs data to provide intraday direction to the loonie.

EURCAD edges higher in early trading, with both currencies mostly sidelined ahead of the US Nonfarm payroll report.

EUR extends gains through 1.0700 to hit a fresh May high as risk sentiment continues to improve. Consistent jobs data helped support the Euro amid a softer USD as trading remains relatively thin heading into today's crucial US jobs data. Domestically, EU employment held steady at 6.5%, while Italian unemployment levels fell to 7.2% vs. 7.5 expected, and in France, industrial output disappointed, falling -0.3% vs. expected +0.3%. The focus will be on the NFP, paying close attention to revisions and the wage inflation component. If we see NFP near the forecast levels and softer wage inflation, we expect the USD to come under further selling pressure.

GBPEUR slips below 1.1700, but overall, both currencies remain sidelined as domestic economic releases for both the EU & UK were positive, The focus shifts to the US employment data for direction.

GBP advances through 1.2550 as the USD remains under pressure heading into the crucial US jobs & PMI data. The pound avoided any impact from the Labour Party victories in local elections, may pundits expecting the outcome. Domestically, S&P Global/CIPS Composite & Services PMI both beat expectations which has helped provide an underlying support to the pound. Intraday it will be the US jobs and PMI data that will provide direction to the pound today.