Overnight Headlines

*USD had another mixed day with safe havens in strong demand

*US equities closed at fresh all-time highs on positive US earnings

*NZD surged on stunning jobs report (unemployment 4% vs 4.5% expected)

USD traded in a narrow range again with the DXY closing marginally higher on the day. CHF and JPY were the best performers making multi-month highs with JPY falling to a low of 108.87 and through July support at 109.06. CHF climbed to its highest level against the EUR this year as EUR/CHF made an intraday low at 1.0712 this morning. AUD appreciated but is still trading below 0.7411 while NZD has jumped +0.52% this morning and looks to be heading towards 0.71.

US equities closed higher on decent US earnings reports trumping concerns about a resurgence in the Delta variant impacting global economic growth. The S&P500 finished at a new record high, led by more defensive stocks like healthcare. This shift in leadership is also partially backed up by the fall in bond yields. Futures are in the green with Asian markets generally higher.

Market Thoughts – First US jobs reports

We get the first jobs numbers of the week from across the pond, ahead of the all-important NFP report on Friday. This is the last monthly data set before the Jackson Hole meeting of central bankers later this month. This is where many market participants are expecting to see a shift by the Fed and potentially more detail on tapering.

The ADP employment numbers today will give us some early hints about the jobs market during July. Although this is not a great gauge for Friday’s non-farm payrolls headline number. The employment index in the ISM non-manufacturing index will also be worth watching for clues on labour shortages.

Chart of the Day – NZD jumps with RBNZ set to act

The jobs report was always a big one for NZD and so it proved. The unemployment rate in New Zealand fell more than expected to 4% in the second quarter from 4.7% previously. Markets are now fully pricing in a first rate hike by the RBNZ at their upcoming meeting on 18 August. The central bank also announced plans to further tighten rules for mortgage lending to help curb rapidly rising house prices.

AUD/NZD has broken down below 1.05 and has its eyes on the December lows at 1.0418. The kiwi major (NZD/USD) looks to be breaking out of its recent range (0.6922-0.7044) with both the 100-day and 200-day SMA just below 0.71. The range now offers strong support with prices being held up in March and April around this zone. Much will now depend on Friday’s NFP report with any disappointment helping kiwi bulls to push above 0.71.