The all important Non Farm Payrolls shocked markets and sparked a major rally on equity markets. Analysts were expecting job losses of around 8 million, but they actually added 2,540,000 jobs and the headline unemployment rate dropped! The unemployment rate was expected to rise as much as 20%, but actually fell from 14.7%, to 13.3%! The participation rate rose back to 60.8%. These are unbelievable numbers, considering the impact of the lockdown, heralding strong economic sentiment. The riots across American cities, failed to dampen market enthusiasm, as the ‘V shaped recovery’ became a reality! This really put things into perspective.
The huge surge in confidence has allowed the safe haven Dollar to experience significant retracement, with the GBP surging to 1.2660, while the EUR trade 1.1280. The risks are immense, with the threat of a second wave of the deadly virus, riots across America and the Chinese situation. Markets have brushed them off, along with historical economic data, surging to pre-pandemic levels.
Commodity currencies have made every post a winner, as the reserve plunges, allowing the AUD to break back above the psychological 0.7000 mark, only to settle back at 0.6960 at the close of the trading week. The NZD was able to book even greater gains, rising above 0.6500, but there remains a significant caveat. These trade exposed, commodity currencies, are extremely vulnerable to disruption of the existing supply chain. Aggressive actions by China in Hong Kong and around the world will face retaliation and this may see further trade sanctions. The US have already announced some sanctions on China, but their trade deal has remained in place. There are significant downside risks to the economic recovery.
Dates & Headlines
8/6 China Trade Exports/Imports, Japan GDP, Japan Current Account, German Industrial Production
9/6 Australia Job Ads, Australia Business Confidence, German Trade Exports/Imports, German Current Account, France Trade, France Current Account, EU GDP, EU Employment, NFIB Small Business Optimism
10/6 NZ Manufacturing, Australia Consumer Confidence, US Weekly Mortgage Applications, US Inflation
11/6 FOMC Meeting, US Budget, US Weekly Jobless Claims
12/6 NZ Consumer Confidence, NZ Business Confidence, EU Industrial Production, University of Michigan Economic Sentiment