JP Morgan

EUR: Currencies continue to be buffeted by multiple factors leading to mixed dollar performance overall. Friday’s payroll highlighted familiar ongoing issues around labour supply, disappointing headline but sticky earnings and lower unemployment rate, but the recent underlying trends of higher yields and higher commodities continued unabated. Whilst equity markets don’t collapse, the dollar is trading bid against the euro and jpy where central banks are firmly on hold, but softer against those where commodities are providing a big fundamental boost to the economy. Risk wise I continue to run long of cad and aud versus the euro.

The cad payroll number Friday was strong across the board and alongside the commodity move and the fact usdcad has broken some key supports this continues to be a favourite trade. I have struggled to buy usdjpy admittedly, the feeling that if growth doesn’t bounce sharply and yields and commodities move robustly higher it will eventually weigh on stocks has been hard to pull the trigger, I guess that’s why it appears to be trending. Also trying to stay short a core in eurczk.

The euro remains heavy without making much new headway, looking at positioning quite a few shorts were added in the last week against both the dollar and commodity currencies, so I am a little wary that perhaps the first move is a small cleanse to the topside, I would expect some short term pain above 1.1610, but would think 1.1660/70 should be stronger resistance, focus below remains on 1.15.


European Open

The greenback traded flat on a day filled with holidays for KRW, TWD and USD. Last Friday’s NFP print that came in under expectations at 194k (500k consensus, 366k prior), although silver linings of upward revisions for the past two months and a dipping unemployment rate helped to signal towards the Fed announcing tapering in November. The Asia session saw a rise in oil prices, with WTI and Brent gaining 2.0% and 1.6% respectively. Asian equities also gained, with NKY and HSI trading higher. The most notable move of the day, however, was JPY, which hit lows last seen in 2018, trading -0.39% during the Asian session. USDJPY was sighted around the 112.67 handle, as UST yields were pushed higher last week by expectations of the Fed easing off stimulus policies.

Looking ahead to a light day of data, we will see a flurry of central bank speak, with Riksbank’s Jansson (17:00 BST), Fed’s Evans (23:00 BST) and a number of ECB speakers. The ECB roster starts with Villeroy (08:00 BST), Centeno and Elderson (09:00 BST), Lane (13:00 BST), Holzmann (15:00 BST) and finally Elderson again (15:45 BST).