Yesterday at the end of day, the NZD was the weakest and the JPY was the strongest of the major currencies. Today, the roles are reversed with the NZD the strongest and the JPY the weakest.
For the JPY, BOJs Kuroda said today that the BOJ "willl continue current extremely accomodative expansionary monetary policy" and the 10 year upper band was not a mistake. Recall on Wednesday, the BOJ kept policy unchanged after their meeting - to chagrin of the market. After the JPY tumbled lower (USDJPY and other JPY pairs higher), buyers in the JPY (sellers in the JPY pairs) returned and erased the gains and more.
In a post yesterday, I spoke to the NZDJPY and how it was testing a swing area ahead of what was the up and down extreme lows seeen since December (see post here and chart below). Today, the declines for the yesterday have been erased. In addition, technically, the price has now moved back above both the 100 and then 200 hour MA, tilting the bias back to the upside. The ups and downs continue in that pair.
Alphabet announced jobs cuts of 12,000, joining other big tech in the job cutting mode. Just as job hiring begets job hiring, job cuts beget job cuts. No one wants to be the last one who did not cut employee costs in a slowdown.
Good news is that Netflix announced decent earnings after the close yesterday. Their shares were up $22 and premarket trading and that is helping the NASDAQ index move higher in trading this morning
The problem is if you look at the claims data, the question is "what cuts?".
The claims data came in at 190K yesterday which was the lowest since April 2022. The data corresponded with the BLS survey for the next employment number to be released the first week of February. What is the Fed to do with employment still strong (at near full employment) while inflation is moving lower?
The Fed officials have been saying to get rates above 5% and then keep them there for a while. The next questions now are "what does that to earnings? growth? unemployment rate? What role does retiring baby boomers fit in the equation? Will there always be a shortage of workers as the pool of available workers exit and never return? What does that do to labor costs?"
Those are the challenges - and challenging questions - for the Fed. The Fed seems fearful of repeat of the Volker era in the early 80s when he raised rates, cut rates too soon and had to raise rates again to kill inflation. Of course that was then, this is now, but that playbook is what the Fed is watching.
Canada retail sales will be released at 8;30 AM. Existing home sales will be released at 10 AM. Today is the last day to hear from Fed officials before the quiet period begins ahead of their February 1 rate decision.
IN other markets:
- Spot gold is down to three dollars or -0.17% at $1928.62
- Spot silver up $0.10 or 0.45% at $23.92
- Crude oil trading of $0.40 at $81 even
- Bitcoin is trading just above the $21,000 level at $21,082. At the 5 PM close yesterday was at $20,977
In the premarket for US stocks, the major indices are trading higher after declines across the board yesterday
- Dow Industrial Average is up 19 points after falling -252.40 points
- S&P index is up 11.7 points after yesterday's -29.9 point decline
- NASDAQ index up 80 points after yesterday's -104.74 point decline
the European equity markets, the major indices are rebounding with other equity markets
- German DAX +0.51%
- Francis CAC, +0.7%
- UK's FTSE 100 +0.27%
- Spain's Ibex +1.25%
- Italy's FTSE MIB +0.85%
in the Asian Pacific markets:
- Shanghai composite index rose 0.76%
- Hang Seng index rose 1.82%
- Nikkei 225 index rose 0.56%
- Australias S&P/ASX index rose 0.23%
- New Zealand's 50 rose 0.77%
In the US debt market, the yields are higher:
- two year 4.159% +4.2 basis points
- five year yield 3.525% +4.0 basis points
- 10 year 3.431% +3.2 basis points
- 30 year 3.596% +2.8 basis points
in the European debt market, the benchmark 10 year yields are trading to the upside for the second consecutive day. The German 10 year will back above its 100 day moving average of 2.09%. It currently trades at 2.143%.
