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Markets Await tonight’s Non Farm Payrolls

Published September 6, 2019

By Rowan Murphy

The Aussie has rallied hard over the last couple of days climbing ~2% from Tuesday’s low and pushing against resistance, but unable to break and hold, at 0.6825, a level not traded at since the 1st of August. If the Aussie fails to push through this resistance level post US data tonight expect it to take a breather.

The reasoning for this ‘risk-on’ rally seems to be HK withdrawing the controversial extradition bill and the China-US trade talks being tabled again. Will the discussions yield any meaningful outcome this time? I doubt it given the reasons the talks have stalled/abruptly ended in the past, but clearly the markets hold faith that something meaningful will eventuate, apparently, it will put an end to ALL the world’s economic woes as well…

The focus of market participants are firmly fixed on the US tonight with Monthly US Non-Farm Payrolls (NFP) data being released. The NFPs are expected to confirm that the US economy remains in reasonable enough shape with the unemployment rate at 3.7%, near 50-year lows. The accompanying US Wage growth data will be interesting to see as the current 50 year low for unemployment has failed to fuel inflation and if wages remain stagnant it’s just another sign that ‘full employment’ isn’t enough on its own. Will the imposed Trump Tariffs turn the economy further? They have raised the costs of imported goods but not added to productivity, merely filling government coffers.

Also adding to market risks and the current pricing of interest rate curves will be Fed Chair Powell’s speech at 2:30 am tonight, a recent series of Fed speakers have struck a rather dovish tone in their communications with the market this week and market participants will be hoping Chair Powell brings much the same. As it stands ~100 basis points of cuts are priced into the US interest rate curve for the next 12 months. Investors, perhaps now more than ever, will be hoping for a whole lot of ‘goldilocks’ data to keep this pricing in-line. At that, they’ll be crossing their fingers, toes, and algorithms for Chair Powell to at least keep the door open to cutting rates, essentially taking a dovish route.