• US dollar gains across the board on the NFP, tax promises
  • Stocks end the week on the firm footing
  • GBPUSD reverses, moves close to 1.30
  • Highlights of next week include RBNZ, US inflation 

Friday was very positive for the US dollar. The US currency has been struggling for much of 2017 and traders had reasons to be skeptical ahead of Friday’s release as data coming from ISM indices and the ADP report suggested another unconvincing print. However, the NFP report showed that the US labour market remains in a top notch condition: employment keeps on rising above trend, unemployment rate might already be below neutral rate and even wages grow at a decent pace.  Broader analysis of the report could be found here. The bottom line is that while it will take more to drive the greenback clearly higher for longer, the report will reassure the Fed. 

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Euro is the weakest G10 currency on Friday while the US dollar is the strongest. Source: xStation5 

While the dollar is by far the strongest among G10 currencies, the euro and the pound are the weakest. This is not surprising in both cases. The euro has seen a massive increase of interest and it surged to 1.19 this week all the way from 1.04 early in 2017. Along the way speculative positioning has risen to the extreme level so a strong NFP was a natural trigger to take profits. Therefore a move on the euro is clearly technical. However in case of the pound reasons are also fundamental – we mentioned in our analysis yesterday that dovish rhetoric from the Bank of England could spark a larger correction on the pound and that seems to be the case. 

Another reason behind the strong dollar today comes from remarks by White House adviser Gary Cohn, who indicated that taxes are the main priority now. That could be a good news for equity markets as well as the Dow looks to end this week close to all time highs. It’s been a good day for US markets but even more so for European bourses where weaker euro is a relief. Unsurprisingly Europe is leading the boards with 5 major European indices seeing gains north of 1% (FRA40, EU50, POR20, DE30 and SPA35). 

Silver is the top mover among commodities as precious metals have been hurt by the greenback recovery. However, as gold’s prices decline by 1%, silver crashes by 2.2%. Meanwhile Bitcoin (BTCUSD) has been unaffected by the fork and the price is once again looking to be set for another $3000 test. 

The following week will be very interesting for NZDUSD, the pair that has already seen a reversal this week on contrasting employment data – weak from New Zealand and strong from US. We have the RBNZ meeting next Wednesday and it could affect strong (and still overbought) NZD while the US inflation (Friday) will be a true test for the greenback –  keep in mind that the FOMC has been concerned by lower inflation figures, so this report is at least as important as today’s NFP.