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Video / 02 February 2018 at 8:27 GMT

From the Floor: USD weak as yield curve lifts – #SaxoStrats

#SaxoStrats
  • The dollar is weaker as the entire US yield curve lifts
  • US tax reform has boosted wages in some states
  • The bar is very high for the dollar on the NFP data
  • In equities, focus will be on tech sector after Apple miss
  • Gold remains resilient despite rising real yields and weak JPY
  • Crude oil maintains its bullish momentum
  • Next week will be busy with 9 or 10 central bank meetings

SaxoStrats
 
By Clare MacCarthy

The US dollar remains under heavy pressure despite higher bond yields. A surprise uptick in US hourly earnings in this afternoon's employment report could press the greenback even further.

"We've a weak dollar even as the entire US yield curve is lifting," says John J Hardy, Saxo's head of FX strategy of the dollar's predicament. "The plot is very thick on interest rate rises and today's NFP data will feed into this especially if average hourly earnings surprise to the upside. We've already seen that tax reform has boosted wages in several states."

Peter Garnry, Saxo's head of equity strategy, agrees that the nonfarm payrolls data are likely to come in on the strong side, especially given the robust ADP jobs numbers earlier this week.

In equities today, much focus will rest on the technology sector after Apple disappointed with a drop in iPhone sales by volume. Alphabet too, had a bad day yesterday with its shares down 3% in the after-market, despite its Q4 results beating estimates. Amazon, however, continues to reach for the skies and its shares rose 6% in the after-market on unexpectedly strong revenues and forward guidance. Garnry says that Saxo's Quant model has Amazon on the positive list, while Apple is on neutral.

In commodities, Ole HAnsen, Saxo's head of commodity strategy, reports that gold remains resilient despite rising real yields and a weaker Japanese yen. "Notwithstanding the call for a much needed correction gold traders are still looking for the metal to test and potentially break multi-year resistance between $1360 and $1380/oz."

Finally, crude oil maintains its bullish momentum with US production and stock news being offset by a weak dollar, high Opec compliance and price upgrades from major banks. 

NFP New York

US nonfarm payrolls are expected to have increased only very slightly since December. But there may be a surprise in average hourly earnings. Pic: littlenySTOCK / Shutterstock.com
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