Authored by Chris Weston

The Daily Fix – The calm before the potential US payrolls storm

The ECB set the stage for the EU/US trading session and delivered a hawkish cut that really hasn’t surprised anyone – EURUSD popped into 1.0900, but once again traders faded the move above the figure and 1.0900 remains the zone the EUR bulls really want to see give way.

As expected, the ECB did tweak its growth forecast for 2024 to 0.9% (from 0.6%) and its core CPI call to 2.8% (2.6%), and we know with some conviction that the collective within the ECBs ranks are non-committal on future cuts and working on a meeting-by-meeting basis. A somewhat content central bank but one not celebrating just yet, and while we won’t see a follow-up cut in July, if the data is there then we could see one in September, especially if the market feels a greater belief the Fed also ease in that month.

EU equities found small sellers post ECB, but not enough to push the day’s net change into the red, and the EU Stoxx closed +0.7%. In the US, we’ve seen sellers in Nvidia (-1.2%) and Apple (-0.7%), but with Microsoft holding in and good buyers seen in Amazon and Alphabet, the result was a flat close in both the S&P500 and NAS100.

Keith Gill – Manipulator of markets or a genius?

GameStop saw 182m shares traded, with shares closing +47%, as Keith Gill takes to YouTube and the debate as to whether he is a genius or a manipulator rolls on – I sit in the camp that Gill has cornered a part of the market that no one else had looked at, and whether he stumbled upon it or it was 100% premeditated, he’s played his hand and the system, and the real consideration now is that once his 120k call options are exercised is how he goes about getting out of a punchy position without causing a collapse in GME ( and other meme’s). This is where his reputation as a saviour of the retail trader will be lost or truly cemented.

US Treasury markets have closed unchanged across the various maturities, with US unit labour costs (4% vs 4.9%) and weekly jobless claims (229k vs 220k expected) the main economic data points to navigate, although they failed to really move the dial ahead of US nonfarm payrolls (NFP). I’d argue that the Fed will be fairly pleased by the lower read in unit labour costs, but it is just a small win in the grand scheme of things and won’t truly affect their thinking.

The lack of real movement in USTs resulted in limited ranges in G10 FX, with EURUSD, GBPUSD and USDJPY largely unmoved on a net change basis. AUDUSD has seen some buying into 0.6666 and continues to focus on the range highs of 0.6700. We’ve seen some life in the MXN (-1.8%) with headlines that Ignacio Mier – Morena’s leader in Congress – would soon look to pass the structural reforms, although I’m not sure that should surprise anyone too intently.

We have some notable moves in commodity markets – Gold has broken above the range highs of $2362, which bodes favourably for those set long, although the upside is hard to chase ahead of NFPs. Gold miners have worked well, with the GDX ETF closing at +3.5%. Silver has really kicked with price pushing +4.3% and at $31.30 looks up at the 29 May highs of $33.30 – big levels for the radar. Copper sits at +1% at $4.671 and really needs a push through $4.696 to get the momentum pumping. Crude has added 2% and pushed into $75.57 as we look to see if it can kick back into the former trading range of $81 to $76 – where the moves in crude have seen US energy names outperform on the day (the S&P500 energy sector closed +0.6%).

The wash-up of the leads is we should see Asian equity indices open on a mixed footing, with the ASX200 eyed +0.2% at 7835, the HK50 +0.5% and the NKY225 -0.1%. By way of a guide, BHP’s ADR suggests an open at $44.77 (+1.6%), so we can assume that materials and energy plays will support, and we may see a modestly weaker open for ASX200 banks, which have been on fire of late.

US NFP playbook

The big factor, of course, not just for equity heads, but on a multi-asset basis, is assessing the risk of holding exposures through US nonfarm payrolls (22:30 AEDT) – the consensus is that we see 180k jobs created, with the unemployment rate (U/E) unchanged at 3.9% and average hourly earnings (AHE) also eyed at 3.9%. The Goldilocks scenario, where risky assets rally, would be an unchanged u/E rate, payrolls coming in between 180k to 200k and a moderation in AHE.

The scenario where risk is sold would likely be a strong print that prices out rate cuts this year – that being, a fall in the u/E rate to 3.8% or below, with payrolls coming in above 250k. The alternative scenario that leads to the same outcome of derisking, is where perceived recessionary risk rise modestly, and for that, we would need the u/E rate to rise above 4%, with payrolls below 140k.

Given US Treasuries have rallied into NFPs, I’d argue there are greater downside risks for equity and gold (upside for the USD), than a positive scenario where the data on a holistic basis hits the sweet spot – a lot of what-ifs and hope, and as always the market will see what it wants to see – not a great backdrop for traders.

Good luck to all.

Best UK retail CFD Broker – Pepperstone. Use this link with the built-in REDDIT promo code. Switch to Pepperstone – it may be the best trade you’ll ever make