US markets dipped on Thursday as investors pondered better-than-expected figures regarding the labour market, as well as a report that the Whitehouse is re-considering its proposal to increase the corporate tax rate.
Private job growth figures for May released by the ADP overnight came in at 978,000, a big increase from April’s 654,000 and the largest gain since June 2020, analysts estimates were 680,000.
Tonight’s official non-farm employment report will be closely watched as traders try to guess any potential policy shifts from the Federal Reserve if the strong jobs figures are repeated.
This week has seen global markets mostly move sideways in a holding pattern near all-time highs as investors wait on further catalysts for market direction. While the overall economic recovery is ploughing on as evidenced by strong figures from most regions, inflation fears are putting a lid on further gains. With important central bank meetings in the US and EU scheduled for mid-June, we could see this sideways action persist until then.
This week has we saw the RBA release its rate decision and monetary policy statement, and a smattering of FOMC members speaking at scheduled events.
Reserve Bank of Australia
The RBA held its monthly rate meeting on Tuesday where it struck a cautious but optimistic tone. Board members decided to leave the official cash rate on hold at a record low of 0.10% and maintaining its target of 10 basis points for yield on a 3-year Australian government bond.
While the RBA took note of a faster than expected economic recovery they are committed to achieving their goals on employment, wage growth and inflation before considering any change in the current accommodative policies which they are still forecasting to happen in 2024.
A handful of FOMC members spoke at scheduled events this week, all stuck to the script that the Fed was watching inflation figures but considered last month’s high readings as “transitory”.
Tonight’s employment figures and next week’s Core CPI figures will test this dovish tone from the Fed should they both come in with elevated readings.
The US dollar bounced back this week outperforming all major currencies. The Dollar Index held its long-term support levels around 89.60 and rebounded from recent weakness on strong economic figures to around 90.5 at the time of writing. With inflation worries still playing a part in traders’ mindset, 10-year treasury yields rose above 1.6% further fuelling the greenback’s rally.
Source: GO MT4
AUDUSD is still trading in its US 0.76 0.78c range that it has bounced around in most of the year. Iron ore prices remaining persistently high have supported the Aussie, whilst a dovish RBA and strengthening US dollar have held it from making any real gains over the 0.78c level. Tonight’s non-farm figures out of the US could see the AUDUSD test its 2021 support at 0.76c if we see a hot figure come through.
Source: GO MT4
After the rout we saw on cryptocurrencies late last month, this week saw an attempt to retrace the losses, but with far less enthusiasm than we have seen in the recent past.
With price and sentiment being the fundamentals in cryptocurrency markets, recent losses have seemed the wind taken out of the sails of the momentum-driven rally we saw earlier in the year, with BTCUSD struggling to break the psychologically important 40k level.
Source: GO MT4
Ether (ETHUSD) has seen a better recovery from the recent crypto rout than Bitcoin. Recent research papers from investment banks such as Goldman Sachs showing a greater acceptance of the Bitcoin rival.
|Monday, 7 June 2021
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