The unemployment rate dropped to 7.4% but the participation rate also fell. NFP came in at 162,000 (versus expected of around 185,000). The USD lost significant ground against the yen and the pound but it was a different story against the AUD. AUD/USD actually printed a low of 0.887 and remained contained under 0.90.
While there will continue to be a focus on tapering expectations, Australia has quite a bit of event risk this week. Today we have retail sales due out at 11.30 with a 0.4% rise expected. Of course tomorrow we have the RBA rate decision with consensus pointing to a 0.25% cut. The market is pricing in around 91% probability for a rate cut with 26 out of 27 economists calling for a cut. With that in mind, it certainty implies that the cut is priced in. As a result, we will see strong emphasis on the statement tomorrow. Before the RBA tomorrow we also have trade balance and ANZ job ads due out, and later in the week we have jobs numbers due out.
Thursday is a big day for the AUD as we also have China’s trade balance numbers. USD/JPY dropped from within striking distance of the 100 level all the way down to 98.66 before stabilising. There is no major data out of Japan until later in the week when the BoJ hits the wires. As a result, most of the moves in the Nikkei will mainly be currency based until then. The BoJ is relatively split about future policy directions and seems like it might continue to take a wait-and-see approach. Investors will continue to monitor developments on the sales tax.
Focus this week switches from manufacturing to services PMIs which generally don’t carry as much weight; apart from Europe where services are huge. EUR/USD spiked to 1.329 on Friday and remains within striking distance of the 1.33 handle. Later today we have Spanish, UK, Italian and European services PMIs due out. These might cause some volatility for the EUR/USD and GBP/USD later today. In the US we have the ISM non-manufacturing PMI to be released while Fed members Fisher, Plosser, Evans and Pianalto all hit the wires this week.