The US dollar and capital markets have apparently lost their appeal, especially before a hot weekend in Athens. Despite the somewhat disappointing Non-Farm Payrolls yesterday (223k), the falling Average Hourly Earnings (0.0%), the increased Unemployment Claims (281k) and the declining Factory Orders (-0.1%), the data does little to change the outlook for the economy or the Fed’s view on the interest rate hike in September. Why? Probably because the labor market has created on average 208k jobs this year, well above the growth rate in the labor force, the unemployment rate is at 5.3 % roughly in line with the FOMC projection, the labor market creating well above 200k jobs per month and GDP momentum improving (in addition, it is an opinion also shared by advised commentator of the Fed decision, Jon Hilsenrath, in the WSJ).
The US dollar, initially strong on Thursday, lost ground after figures from the labor market. The EURUSD quotation is still below 1.1100 as the Euro is confronting more serious problems which threaten to trigger the price down to parity. After negotiations were postponed until after the referendum, Yanis Varoufakis declared that if the Greeks vote ‘yes’, Athens will find a way to sign the deal, but he will resign as finance minister, while if the Greeks vote ‘no’, Athens will start talks on a new deal. The situation is tense and the market opening next week may bring bigger surprises than last week.
Meanwhile, Sweden’s central bank lowered its main interest rate deeper into negative levels (by 10 basis points) and expanded its bond purchases to the end of the year (by 45bn SEK) as the turmoil in Greece raises. The graph of the USDSEK quotation resumes the ascending trend as the price has recently broken the superior line of the descending channel (a correction on a weekly interval). On the short term, a breakout of 8.4750 could help the price rise to 8.5580.
The price of oil has resumed the descending trend as the Crude Oil Inventories in the United States were reported up to 2.4 million barrels. Oil prices continue to fall as a rising U.S. rig count amplified fears of oversupply and after Chinese regulators opened an investigation into suspected stock market manipulation. The price of the WTI oil marked a support area around 56.50, but it would take maximum one day to see the prices down to 56.00.
Concerning the nuclear talks with Iran, it looks like the officials said they are ready to cooperate with IAEA on controls. A deal is coming, but for now the price of oil is ignoring the news.
The New Zealand dollar is the weakest currency in the G10 as ANZ lowered their milk prices forecast. The trend may continue even next week.
