As mentioned on Friday’s open, a weaker than expected job print would result in a drop in treasury yields, and this is precisely what we got. Job additions came in at 150,000 vs an expected 180,000, with the previous month revised lower from 336,000 to 297,000 and the unemployment rate rose to 3.9%. Weakness on yields caused USD to retreat further, equities to climb higher and GBPUSD and EURUSD to climb to near 2-month highs. USD took a further hit in the afternoon after services PMIs came in shy of expectations. GBP in general had a positive day following a higher revision on UK service PMIs.
* Daily move - against G10 rates at 7:30am, 06.11.23
** Indicative rates - interbank rates at 7:30am, 06.11.23
November is typically a month where risk sentiment improves, and that’s precisely what we saw last week, with risk assets gaining and USD weakening with US treasury yields dropping off recent highs. Just final PMI numbers from Europe today, the Sentix investor confidence and final construction PMI numbers, as well as speakers from the ECB and BoE. The economic diary is light for the rest of the week, with the highlights being the RBA rate decision early tomorrow morning, China inflation numbers on Thursday, and estimates of growth for the 3rd quarter here in the UK. In terms of market moves, we expect a minor continuation of last week's moves which will involve further gains on GBP and EUR, particularly versus USD considering recent falls on treasury yields. However, we do not expect last week's weakness on USD to last for too long, especially if we get any push back from Fed officials this week.
Last week's dovish interpretation of the Fed meeting, as well as misses on US job numbers on Friday, caused US treasury yields to drop off their recent highs and cause weakness on USD. GBPUSD and EURUSD both took advantage, with both pairs now trading near two-month highs.
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