Overnight Headlines

*USD mildly bid this morning after strong selloff post-NFP

*US equity futures are modestly lower, European bourses mixed

*Markets await ECB meeting and US inflation numbers Thursday

US equities ended last week on a strong note and the mixed NFP report lifted global indices to a new all-time high. As US bond yields sunk, so growth / tech took the lead and cyclicals outperformed defensives. The Vix has fallen to 17 and financials underperformed. European markets look poised for more record highs.

USD is endeavouring to claw back some losses after Friday’s selloff. EUR got close to 1.21 on Friday morning but bounced strongly while GBP dropped below 1.41 before rebounding back into the range. “Super Thursday” looms with multi-year and multi-decade prints in US inflation numbers.

Market Thoughts – NFP and this week’s events

Payrolls disappointed for a second straight month which means the Fed can continue in “go-slow” mode. A protracted recovery remains on track and far from their goal of full employment. Markets reacted most to the headline miss than the more complicated picture around the tightness in the jobs market with unemployment dropping to 5.8% from 6.1% and the higher-than-expected wage growth. This potential impact on price developments could be a focus further down the line.

As for this week, the BoC will keep on track as being the hawkish central bank cheerleader, though we might not hear too much from them with Canada job numbers falling a second month in May. The market is positioned for a dovish ECB with President Lagarde trying to avoid getting tangled up in taper talk. She will also not want to do anything to encourage a stronger euro. Battling for Thursday’s headlines will be the US CPI data which may be the peak in inflation as base effects and supply chain issues top out.

Chart of the Day – Gold bounces off trendline

After recording its best month year-to-date in May rising close to 8%, this month has been less encouraging for gold and it fell back below $1900 last week. ETFs had their first inflows in three months which may bring some support going froward. But negative real yields with higher inflation and the Fed’s “wait and see” policy will be the key driver.

Technically, Friday’s initial morning fall touched the bullish trendline from the April low and bounced very encouragingly for gold bugs. Strong support also lies below here at the 200-day SMA around $1842. Last Tuesday’s high at $1916 is the key resistance level if bulls want to see the year-to-date peak at $1959.