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Greenback Snaps Winning Streak as NFP Undermines Uptrend

FOREX
  • The greenback snapped the winning streak Friday, with the uptrend in the USD Index undermined by the July Nonfarm Payrolls release. A poorer-than-expected headline and negative revisions countered any hawkish overtones from the average hourly earnings and the drop in the unemployment rate. The release, compounded with the recent pullback in CPI inflation, has helped ease market-implied peak pricing at the Fed in November by ~4bps off the day's high, weighing on yields and helping support equities.
  • The USD pullback helped prompt a corrective recovery in EUR/USD, which rallied to touch 1.1042 and clear the Wednesday high in the process. This cements the 50- and 100-dmas as key supports, which have held well this week at 1.0937 and 1.0920 respectively.
  • A firmer oil price into the close has favoured oil-tied FX, putting NOK at the top of the G10 pile. The moves come ahead of next week's July CPI report, at which markets expect the Norges Bank's favoured inflation gauge - CPI-ATE - to ease off a cycle high of 7.0%. Continued stubbornness in inflation would work against any expectations that the bank can revert to 25bps hikes at the August rate decision.
  • Focus in the coming week turns to global inflation, with US, Norway and China all posting their latest CPI prints. The Banxico decision is also due, with the bank seen standing out from regional peers by keeping the overnight rate unchanged.
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