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NFP Report Snaps The Greenback's Winning Streak

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 plus softer hours worked countered any hawkish overtones from strong AHE 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. That was until a late slide in US stocks, seemingly flow- rather than headline-driven ahead of the weekend, which has provided a small uplift for the USD index but with DXY still -0.6% on the day.
  • 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, although CAD underperforms notably on US linkages and its own softer jobs print. The moves in NOK 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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