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While the door is still ajar for a July rate hike, it has turned into a sliver from being wide open. While one data point does not a trend make, the worst NFP since 2010 was also accompanied by a large 2.6 index point decline in the US ISM Non-Manufacturing PMI heightening fears that there could be a more concerning trend developing. Certainly, should a similar NFP number be seen for June, the question no longer becomes when the next rate hike will be but more what the introduction of negative rates will mean for the US and the global financial system.
The US dollar collapsed 1.6% on the news, causing great ructions in the FX space. The Japanese yen and the Kiwi dollar both saw 2.2% increases, while the Aussie dollar and the Euro both increased 1.9%. The DXY dollar index collapsed below the lower Bollinger band (two standard deviations below the 20-day moving average), which often indicates an unusually extreme move and some investors often use this as a signal for mean reversion. The last time we saw a daily move this large was 3 December, but by 17 December half of that selloff had been retraced.