Non Farm Payrolls beat expectations, adding 943,000 jobs for the month and taking the headline unemployment number down to 5.4%. This gave markets a boost and allowed bond yields to firm, supporting a stronger US Dollar. The EUR crashed to 1.1750, not helped by a 1.3% contraction in German Industrial Production, while the GBP fell to 1.3870.
The surging US Dollar is a reflection on rising pressure the Fed is experiencing to taper QE and even consider a rate hike, down the road. The Fed can only get away with labelling inflation as transitory for so long. They will need to recognise the threat it poses to the US economy and act. The US Dollar is supported by these pressure and pushed the commodity currencies off recent highs, with the NZD falling to 0.7000, while the AUD slumped to 0.7350.
The coming week is littered with inflation data releases, across the globe and this will be the primary driver of markets in the coming week, save any surprises regarding the virus or ‘Black Swan’ geopolitical events.