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USD's NFP Surge Proves Short-Lived as NY Earthquake Undermines Yield Spike

FOREX
  • The USD surged in the initial response to the solid US jobs report, within which both the headline job gains and average hourly earnings topped market expectations.
  • The market response was to shift back pricing of the first FOMC rate cut this year, which is now fully priced for the July meeting, and broadly 50/50 for the June decision. This pressed USD higher, keeping the USD/JPY pressure tilted to the upside, however the rally stopped short of any material test on the cycle high posted midweek at 151.95.
  • Greenback strength was short-lived however, after the once-in-a-quarter century earthquake in New Jersey prompted buildings to shake across Manhattan and New York. The grounding of aircraft and concerns over infrastructure prompted a backtrack in US yields - weakening the dollar.
  • Aggressive rhetoric from Hezbollah on possible retaliation toward Israel for the strikes on the Iranian consulate in Damascus aided the flight to quality, further buoying the bounce across the major pairs. EUR/USD and GBP/USD swiftly erased the post-NFP dips ahead of the London close.
  • Focus in the coming week shifts to the ECB rate decision - at which the bank are expected to stand pat on policy as the governing council awaits more labour market and price data ahead of the more live meeting in June - toward which consensus has begun to look for a first rate cut of the cycle.
  • Ahead of that decision, markets get March CPI numbers from the US, and another step lower for price pressures is expected. Y/Y Core CPI is seen slowing to 3.7% from 3.8%.
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