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Citizens Foreign Exchange: Your Foreign FiX for Friday, May 3 |
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Your Foreign FiX
Friday, May 3, 2024 |
| The US Dollar is trading significantly lower, following a disappointing nonfarm payrolls for April, advancing 175,000, but well below the 240,000 expected. The details of the report were also weaker, with the unemployment rate moving up to 3.9%, while average hourly earnings increasing .2% month over month, versus .3%, while the year over year increased to 3.9%, one tenth below expectations. Additionally, past revisions dropped 22,000. These are Fed friendly numbers and give them more cover to cut perhaps as early in June. Perhaps Fed Chair Powell had some insight of this report on Wednesday, explaining his dovish tone. US interest rates are trading much lower across the curve, but have bounced from the lows, following the report. The US 2-year is trading at 4.77%, down 10-bps from yesterday and down 26-bps from the cycle high, set earlier this week. The OIS market is pricing a 40% chance for a 25-bps cut in July and nearly 100% in September. For 2024, the market is pricing 48-bps of total cuts for 2024. The Bloomberg Dollar index is trading just above the 1,247 level, down 58-bps from yesterday and 1.3% from one week ago. The Dollar has faced a confluences of vectors, including a dovish Powell, JPY intervention, lower US interest rates and now a softer jobs report. The Bloomberg Dollar has turned technically oversold as investors weigh a possible Fed cut. | |
| Canada: The Canadian dollar was little changed despite the dollar trading weaker ahead of the US payrolls data later on Thursday. USDCAD is little changed at just below 1.3665 as of 8:28 am EST. WTI crude futures climbed 0.4% to $79.25 per barrel. USDCAD one-month implied volatility is at 5.05%, down from 5.12% on Thursday. The US two-year yield exceeds its Canadian counterpart by 62.6bps, up from 62.2bps on Thursday. The 10-year yield spread is 84.6bps in favor of US vs 84.4bps in favor of US the previous session. According to economists at one of Canada’s largest lenders, the Bank of Canada’s policy interest rate may fall 100 basis points below that of the Federal Reserve’s without policymakers batting an eye. There is no major economic data scheduled for today. Support comes in at 1.3632 and resistance at 1.3804. | |
| China: The yuan has benefitted from the dollar’s sell-off, with CNH set for its largest weekly gain since November. USD/CNH is now at ~7.19, the lowest level since March and below the key 7.20 support level. Ken Cheung, chief Asian FX strategist at Mizuho Bank, also points out that the capital inflows into China/Hong Kong equities also is supporting the yuan. Look for employment data out of the U.S. to drive flows. Note there’s no trading in the onshore yuan (closed for holiday), so price action will resume Monday. | |
| Europe: The euro is stronger on the back of risk on sentiment ahead of US NFP later this morning. Markets are taking a breather after the Fed’s dovish leaving tilt Wednesday. The eurozone unemployment rate was steady at 6.5%. French industrial and manufacturing production was lower and a bit disappointing, reporting +0.7% and +1.0% YoY. Lower capital goods and food production let a MoM decline of 0.3% for industrial and manufacturing down 0.5%. Expect intraday volatility this morning with NFP being the main focus. NFP data was softer than expected, with unemployment increasing and change in nonfarm payrolls +175k versus 240k expected. A weaker labor report shot the euro to 1.08 as yields and the dollar settle lower. |
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Your Foreign FiX
Friday, May 3, 2024 |
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| The US Dollar is trading significantly lower, following a disappointing nonfarm payrolls for April, advancing 175,000, but well below the 240,000 expected. The details of the report were also weaker, with the unemployment rate moving up to 3.9%, while average hourly earnings increasing .2% month over month, versus .3%, while the year over year increased to 3.9%, one tenth below expectations. Additionally, past revisions dropped 22,000. These are Fed friendly numbers and give them more cover to cut perhaps as early in June. Perhaps Fed Chair Powell had some insight of this report on Wednesday, explaining his dovish tone. US interest rates are trading much lower across the curve, but have bounced from the lows, following the report. The US 2-year is trading at 4.77%, down 10-bps from yesterday and down 26-bps from the cycle high, set earlier this week. The OIS market is pricing a 40% chance for a 25-bps cut in July and nearly 100% in September. For 2024, the market is pricing 48-bps of total cuts for 2024. The Bloomberg Dollar index is trading just above the 1,247 level, down 58-bps from yesterday and 1.3% from one week ago. The Dollar has faced a confluences of vectors, including a dovish Powell, JPY intervention, lower US interest rates and now a softer jobs report. The Bloomberg Dollar has turned technically oversold as investors weigh a possible Fed cut. | |
| Canada: The Canadian dollar was little changed despite the dollar trading weaker ahead of the US payrolls data later on Thursday. USDCAD is little changed at just below 1.3665 as of 8:28 am EST. WTI crude futures climbed 0.4% to $79.25 per barrel. USDCAD one-month implied volatility is at 5.05%, down from 5.12% on Thursday. The US two-year yield exceeds its Canadian counterpart by 62.6bps, up from 62.2bps on Thursday. The 10-year yield spread is 84.6bps in favor of US vs 84.4bps in favor of US the previous session. According to economists at one of Canada’s largest lenders, the Bank of Canada’s policy interest rate may fall 100 basis points below that of the Federal Reserve’s without policymakers batting an eye. There is no major economic data scheduled for today. Support comes in at 1.3632 and resistance at 1.3804. | |
| China: The yuan has benefitted from the dollar’s sell-off, with CNH set for its largest weekly gain since November. USD/CNH is now at ~7.19, the lowest level since March and below the key 7.20 support level. Ken Cheung, chief Asian FX strategist at Mizuho Bank, also points out that the capital inflows into China/Hong Kong equities also is supporting the yuan. Look for employment data out of the U.S. to drive flows. Note there’s no trading in the onshore yuan (closed for holiday), so price action will resume Monday. | |
| Europe: The euro is stronger on the back of risk on sentiment ahead of US NFP later this morning. Markets are taking a breather after the Fed’s dovish leaving tilt Wednesday. The eurozone unemployment rate was steady at 6.5%. French industrial and manufacturing production was lower and a bit disappointing, reporting +0.7% and +1.0% YoY. Lower capital goods and food production let a MoM decline of 0.3% for industrial and manufacturing down 0.5%. Expect intraday volatility this morning with NFP being the main focus. NFP data was softer than expected, with unemployment increasing and change in nonfarm payrolls +175k versus 240k expected. A weaker labor report shot the euro to 1.08 as yields and the dollar settle lower. |
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Percentage Change |
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1M |
3M |
6M |
9M |
12M |
24M |
USDCAD |
0.54% |
1.52% |
-0.43% |
0.46% |
1.78% |
5.93% |
USDCNH |
-0.73% |
-0.33% |
-0.31% |
-1.37% |
1.20% |
7.43% |
EURUSD |
-0.83% |
-0.34% |
-1.54% |
-0.45% |
0.36% |
3.20% |
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Annualized Forward Differential |
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1M |
3M |
6M |
9M |
12M |
24M |
USDCAD |
0.50% |
0.61% |
1.01% |
0.71% |
0.70% |
0.62% |
USDCNH |
2.04% |
2.19% |
3.50% |
2.43% |
2.43% |
2.17% |
EURUSD |
1.48% |
1.60% |
2.52% |
1.76% |
1.75% |
1.72% |
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Implied Volatilty |
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3M |
6M |
9M |
12M |
24M |
6M-RR |
USDCAD |
5.24% |
5.35% |
5.63% |
5.66% |
5.78% |
0.56% |
USDCNH |
4.24% |
4.95% |
5.76% |
6.11% |
6.50% |
0.13% |
EURUSD |
6.03% |
6.15% |
6.49% |
6.54% |
6.71% |
-0.72% |
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| Loonie Little Changed Ahead of US Payrolls Data |  | | | | | EUR Stronger on Weaker US NFP Report |  | | |
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| Read our technical documentation to learn more about this data. |
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