Forex news for New York trade on September 4, 2020:
- US August non-farm payrolls +1371K vs +1350K expected
- Canada net change in employment for August 245.8K vs 250K estimate
- Fed's Powell: Economy will need low interest rates for years
- SoftBank is the 'Nasdaq whale' that's been buying stock options
- Fed's Rosengren: The market understands we're not raising rates any time soon
- Baker Hughes oil rigs 181 vs. 180 last week
- UK Brexit negotiator Frost: we will negotiate with EU constructively, but...
- Kudlow: There are wide areas of disagreement on size and scope of next virus aid bill
- August Canada Ivey PMI 67.8 vs 68.5 prior
- CFTC commitment of traders: EUR longs are trimmed in the week but still near all-time high levels
Markets:
- Gold up $3 to $1934
- WTI crude down $1.72 to $39.65
- US 10-year yields up 7.7 bps to 0.71%
- S&P 500 down 28 points to 2426
- Nasdaq down 1.2%
- CAD leads, CHF lags
It was a wild ride in the aftermath of the non-farm payrolls report. The data itself was generally positive. The headline matched estimates but in reality it was a bit softer because of disappointing private jobs. However the unemployment rate made a big surprise drop to 8.4% from 10.2%, though that also may have been skewed by a low response rate.
Initially, the response was a 20 pip rise in the US dollar across the board.
That was just the start of the story because when equity markets opened an hour later, all hell broke loose. Initially, stocks were flat and even jumped briefly to the upside but waves of selling soon arrived and crushed the market. The S&P 500 fell by as much as 3% and the Nasdaq as much as 5%. In fact, those were almost precisely the lows in both but from there either the humans or the machines started to turn the market around.
From there, the S&P 500 made it all the way back to positive territory -- again almost to the tick -- before it sank again late. The drop coincided with comments from Powell, who was upbeat on jobs and the recovery in what might be a sign that he's not going to do more in September.
In terms of FX, it was crystal clear that the currency market was one step ahead of equities. The drops and the recoveries were about an hour ahead of stocks and worked like a crystal ball.
Every major chart is v-shaped to close out the week with 60-80 pip drops followed by recoveries of the same size. On net, all of the euro, pound, yen and dollar finished the day virtually unchanged.
The winner, despite the plunge in oil prices, is the Canadian dollar. That's certainly a headscratcher and I also highlighted the remarkable resilience of the Mexican peso this week.
When you look back on the week, the dollar on Monday looked like it was on the brink of a breakdown. Then there was a reversal followed by a rout in equities. Yet when we add it all up, the dollar bounce has hardly been inspiring. That's ominous going forward, something I wrote about here.
As for what's next, it's a long-weekend in the US and Canada; then we get the ECB decision next week. It's also the unofficial end of summer. Enjoy it!
