USD eased and bond yields tumbled on Friday following the latest monthly US employment report. The data showed both the unemployment rate rising and less job creation than forecast, stoking fears of an imminent US recession.
Interest rate markets were quick to react with steep falls across the curve, prompting multiple Tier 1 Investment banks to now call for two consecutive 50bps rate cuts at the upcoming FOMC meetings, and over 1.40% of easing by year-end.
The disappointing US employment report came hot on the heels of weak PMI data, further heightening fears of a US recession. Global equity markets were hit hard, instigating huge safe-haven flows into JPY, CHF and EUR. The panic selling has continued into the start of this week with the Japanese equity market closing down by a whopping 12% and the US Nasdaq expected to open over 5% lower.
*Daily move - against G10 rates at 7:30am, 05.08.24
** Indicative rates - interbank rates at 7:30am, 05.08.24
Weaker macro-economic data and warnings of an imminent Hezbollah/Hamas attack on Israel have put markets on edge. News out over the weekend that Warren Buffet’s Berkshire Hathaway has dramatically reduced its stock holdings is further adding to the bearish sentiment as we start the new week.
Adding to the market's woes, the rise in the US unemployment rate has triggered one of the most accurate recession predictors with 100% success rate going back to 1970, known as the “Sahm Rule”.
This states a recession is imminent when the current three-month moving average in the unemployment rate exceeds the lowest three-month moving average over the past year by half a percentage point or more. The current Sahm Rule reading is 0.53%, according to Fed data, having surged from 0.43% in June.
Our team of currency experts are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer specialised guidance on the best options available to you. Over the last 19 years we’ve helped over a million customers and last year alone processed over £12bn. We’re tried and trusted, and we’re ready to help you.
Have a great day.
