The dollar had a strong day on Friday as US Non-Farm Payrolls data beat expectations along with the Average Hourly Earnings numbers. The combination increases the chances of further rate hikes from the Fed and should keep the greenback well supported in the first few sessions of the week, alongside dollar strength the US 10 year yield jumped to 2.94% . Adding to the mix, President Trump advised that he’s prepared to impose tariffs on everything that hits US shores from China, this has put the stock markets on the back foot with the Asian indices set to open in the red this morning.
Emerging markets currencies did gain a bit of a respite on Friday despite ongoing trade fears, but given the latest comments from the US, investors are likely to see the potential for further depreciation with the trade war cranking up yet another notch. Many EM’s have broken ranges to trade at historically weak levels and investors will continue to monitor the sector closely with contagion fears still very much a major concern.
The Aussie dollar again took another step lower against the greenback and opens the week just above 71 cents. Negative market sentiment on global trade concerns should continue to drive the battling currency lower despite a strong GDP print last week and a more positive RBA outlook. Next stop on the down side technically is the key psych level of 70 cents and a break of there will see if test the 2016 low of 0.6827, after that its plain sailing to the low 60’s and levels not seen since the Global Financial Crisis in 2008.
It’s another potentially volatile week for the markets ahead with a plethora of tier 1 data risk events, two major central bank announcements and plenty of key speakers. The UK will be under the investor microscope for most of the week with the GDP and Manufacturing production data due out tonight, earnings numbers tomorrow and the Bank of England’s Official Rate announcement on Thursday as well as the every present Brexit sentiment see saw.