The strongest to weakest of the major currencies

The NZD is the strongest of the major currencies and the JPY is the weakest to start the trading week. The USD is mostly lower with declines versus all the major currencies with the exception of the JPY, despite the rise in yields today. It is the day after the US jobs report which showed a larger than expected increase in jobs, but revisions tempered the gains. The earnings and unemployment rate (tied for lowest level since 1969) is still indicative of a strong jobs market.

The NZDUSD moved above its 100 day moving average last week. The price traded above and below it on Friday strayed during the employment volatility, but closed above. Today, the low price based ahead of the 100 day moving average and moved above the Friday high and the highs from April 13 and 14th. The price is trading at the highest level since April 5 (see chart below). The move above and away from its 100 day moving average increases the bullish bias with the next target area between 0.6363 and 0.63948 on the daily chart.

NZDUSD moving away from its 100 day moving average

This week, traders may start to focus more and more on what is happening (or not happening) in Washington. Over the weekend, Treasury Sec. Yellen warned of a potential "constitutional crisis" if Congress fails to raise the debt ceiling, leading to an "economic and financial catastrophe." President Joe Biden will meet with Republican and Democratic leaders this week (on May 9) to discuss debt ceiling negotiations and financial challenges ahead of the June 1 deadline.

The Federal Reserve's Senior Loan Officer Opinion Survey will get traders attention later due to volatility in the U.S. banking sector, particularly among midsize lenders (2 PM ET release today). The report will reveal if lending conditions at regional banks have tightened further since 44.8% of respondents in January reported tightening standards. If this number reaches 60.2%, it would align with levels seen during the last four recessions. The Fed Chair suggested that such an increase might indicate the U.S. central bank is approaching the "neutral rate" for borrowing costs. The FOMC financial stability report will be released at 4 PM ET. Meanwhile, ARKs Cathie Wood said the banking crisis is not over as the Fed has gone too far, and Elon Musk agreed. At the annual Berkshire Hathaway meeting over the weekend, Warren Buffett criticizes bank executives, regulators, and the media for poor messaging around recent bank collapses, contributing to fears of contagion in the financial industry.

On Friday, Chicago Federal Reserve Bank President Austan Goolsbee said that it's too early to consider further interest rate hikes in June based on strong job gains in April. He emphasized the need to monitor credit conditions, given recent issues with regional banks like First Republic Bank. Goolsbee cautioned that tighter credit conditions could slow the economy, and future rate decisions should consider the banking system's impact.

Feds Bullard on Friday also said the recent quarter-point rate hike, which puts the Fed above 5%, is a good step despite the high inflation in the economy. He sees the base case is for slow growth and declining inflation, not a recession. He said the stronger-than-expected jobs report indicates a tight labor market that will take time to cool. Regional banks are expected to do fine despite some issues, and the Barr Report highlights that regulation cannot fix bad management. He stressed that the Fed aims to achieve a soft landing while maintaining growth and consumption with a strong labor market. They hope to bring inflation down by normalizing the labor market without causing high unemployment. The US is currently focusing on controlling inflation, and it is believed that monetary policy alone will not lead to a recession. The debt ceiling is a crucial vote for Congress, and the distinction between large downtown commercial real estate and smaller areas should be considered.

Germany's industrial production for March fell -3.4% vs -1.4% estimate partly due to a weak automotive sector, despite growth in the first two months of the year. The German economy which began 2023 with a strong performance, is showing signs of slowing down, raising concerns of a recession in Europe's largest economy. With a decline in retail sales and exports during the same period, analysts at ING believe the chances of a downward revision to Germany's first-quarter economic activity have increased.

This week, the US CPI data will be released on Wednesday with expectations of 0.4% for the month to month and the year on year coming in at 5.0% unchanged from the previous month. The core is expected to rise by 0.3%. That's not enough to dissuade the Fed to raised rates by 25 basis points last week to 5.25%.

U.S. stock futures are higher in pre-market trading. US yield are higher to start the week after a volatile down and up week.

Taking a look around the markets:

  • Spot gold is trading up $6.50 or 0.33% in $2022.43
  • Spot silver trading down $0.04 or -0.15% or $25.60
  • WTI crude oil is trading above $1.93 or 2.7% $73.28
  • Bitcoin is trading lower on the day at $27,967. On Friday, the digital currency closed at $29,547. The high over the weekend reached $29,851. The low was today at $27,617. Binance temporarily halted Bitcoin withdrawals twice in under 24 hours due to high volume, resulting in a 2% drop in Bitcoin's price. The exchange has faced multiple issues this year, including legal action and a software glitch. To encourage crypto miners to process pending transactions, Binance plans to raise fees. The increase in Bitcoin transactions is partly attributed to the Ordinals protocol, which enables users to create non-fungible tokens featuring digital content on the network.

In the premarket of US stocks are trading mixed with the NASDAQ index down marginally

  • Dow industrial average up 78 points after Friday's 546.64 point rise
  • S&P index is up 7.5 points after Friday's 75.03 point rise
  • NASDAQ index is down -3 points after Friday's at 269.01 point rise

In the European equity markets, major indices are also higher. UK is on holiday to commemorate the crowning of King Charles (and Queen) over the weekend. Cheers. France is also on holiday today

  • German DAX of 27.49 points or 0.17%
  • Spain Ibex up 65.89 points or 0.72%
  • Italy FTSE MIB +109 points or -0.40%

In the US a debt market yields are higher after a down and up training week last week

  • 2 year yield 3.970% up 4.8 basis points
  • 5 year yield 3.453% +3.4 basis points
  • 10 year yield 3.473% +2.7 basis points
  • 30 year yield 3.792% of 3.0 basis points

In the European debt market ahead of the ECB rate decision, the benchmark 10 year yields, are trading higher. Ignore the UK and France change as both countries are on holiday today.

European yields
European yields are mostly higher