Article / 06 June 2016 at 7:00 GMT

Morning Markets: Yellen prepares for about-turn

Managing editor, / Saxo Bank



  • Germany: Factory Orders                                                                                (0600 GMT) 
  • Eurozone: Sentix Investor Confidence                                                             (0830 GMT) 
  • US: Labour Market Conditions Index                                                               (1400 GMT) 
  • US: Fed Chair Janet Yellen speaks at World Affairs Council of Philadelphia    (1630 GMT)

A chastening nonfarm payrolls report for May sent dollar into a spin against all its major peers except sterling as escalating Brexit fears cowed local bulls. GBPUSD did initially spark higher on the back of that 38,000 figure but was marooned below 1.4350 Monday morning before rising slightly just before publication.

An unseemly row between ex-prime minister John Major and the 'Leave' camp has only elevated the uncertainty after Major accused those in favour of exiting the European Union of a  "squalid" and "deceitful" campaign. With 17 days to go to the referendum, this would be a brave time to be a sterling bull.

Federal Reserve chair Janet Yellen speaks today and her pen will have been busy this weekend crossing out swathes of text and amending language. The next Fed meeting is June 14-15 and we can expect a very hasty redrawing of positions.

This month has all but been ruled out as a candidate for the next Fed rate hike with the implied odds shifting from 30% last week to just 4%. July must be a major doubt now too at just a 27% probability in the wake of Friday's cataclysmic shock for the US economy. December meanwhile is back to a 50/50 chance.

It's also causing a headache in Japan too after USDJPY roared all the way to below 106.50 before finding some consolidation at around 107.0. The Nikkei was down more than 1% at one point and was still close to 0.5% down in the run into the European day.

Conversely, Asian stocks in general were perky as the chances of a Fed rate hike in the summer receded sending the MSCI Asia Pacific excluding Japan index to a one-month high. Emerging-market currencies like Malaysia's ringgit and Indonesia's rupiah also took heart from the tumble in the dollar index and the prospect of a more circumspect Fed.

Yellen has much to ponder today. She probably isn't looking forward to it.

Market signals

Asian session

  • Gold made strong gains following the disappointing nonfarm jobs release 
  • The poor jobs data dented confidence in the US recovery, and led to falls on Wall St
  • The retreat on Wall St weighed on investor sentiment in Asia
  • The dollar drop against the yen is a headache for Japanese policymakers and investors
  • The Nikkei 225 retreated to be down close to 0.5% at 0639 GMT
  • The Shanghai Composite was slightly negative on the day
  • Markets will be closed for a public holiday in China on June 9 and 10
  • Hong Kong celebrates the festival too, but it only takes one public holiday on June 9
  • Australian job ads rose 2.4% in May; they were down 0.6% in April
  • Australia's MI monthly inflation gauge fell 0.2% in May, from April when it rose 0.1%
  • The S&P/ASX200 made gains as top miners and gold explorers rallied
  • The S&P/ASX200 was up 0.8% to 5360 at 0500 GMT
  • 10-year Aussie bond yields are below 2.2% for the first time ever, at 2.17%
  • The RBAis expected to keep rates on hold at its meeting on Tuesday

Forex ahead

  • The US dollar lost ground against the yen, falling below ¥107
  • USD was worth just ¥106.5915 at 0055 GMT
  • The Australian dollar surged to its highest level in a month as the greenback fell
  • The Aussie dollar was worth 0.7326 at 0055 GMT

From the Floor

Payrolls fallout. "The Fed now has egg on its face", says Hardy.

Samsung stock rallies. “Samsung remains ridiculously undervalued,” says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

The Fed reading on the labour market may reveal whether Friday's deeply disappointing nonfarm payrolls figure was just noise, or a warning of trouble ahead for the US, says James Picerno.

Central bankers back in play
The poor nonfarm payrolls print may force central bankers who were on the sidelines expecting a Fed hike back onto the field to play some hard yards, says Kay Van-Petersen. 

False dawn
Investors have surged back into industrial metals, but a wary executive from South32 warns of more pain ahead for commodities, says the team at Saxo Capital Markets Australia.


 Markets will be closed in Hong Kong and China on Thursday June 9 for the Dragon Boat Festival holiday; China takes June 10 as well. Photo: iStock

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06 June
Martin O'Rourke Martin O'Rourke
Sterling is regaining some of its mojo Monday morning climbing to 1.4454 at 0836 GMT. Dollar is still on the defensive against yen and euro with the latter at 1.1358.


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