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Stocks attempt relief rally; USD gains ahead of NFP

Summary:

  • Stock enjoy solid day of gains with all major indices rising  
  • USDJPY hits 6-week high above 107
  • GBP declines following worst services PMI in 20 months
  • NFP in focus with wages the key factor
  • Crypto markets look to stabilise

After a heavy start to the week today has seen some strong gains for stocks as they look to recoup some of their recent declines. To be honest here hasn’t really been a major positive catalyst for the move higher, but I think it is probably a combination of traders realising the latest Chinese tariffs I talked about yesterday weren’t as stringent as they could’ve been and also a bounceback from the pretty extreme negative sentiment we’ve had of late. Gains in excess of 1% can be seen in many of the major benchmarks with the DE30, UK100 and US500 all enjoying a strong move higher.

 The US dollar is on course for its largest day of gains this week, with the buck rising against the majority of its peers. With stocks also in the green, the USDJPY has received a twin boost as the risk-on sentiment that often supports this pair is adding to the strength of the buck. The cross has broken back above the 107 handle in the last hour and is currently trading close to a 6-week high. 

Elsewhere in FX the Pound has come under some pressure with the GBPUSD falling below 1.40. The reason for this decline was that UK services PMI shrank substantially in March coming in well below market expectations as bad weather took its toll. It was the worst reading since July 2016, but the last month print is unlikely to morph into a more notable change.

The US dollar and indices will remain keenly followed over the next 24 hours with the NFP report scheduled to be released at 1:30Pm (BST) tomorrow. We had some strong indications from the US labour market - the ADP report showed another healthy gain in private employment (241k after 246k in March - both were higher than expected). The ISM services, while missing the consensus narrowly on the headline level, showed an increased pace of hiring (the component increased from 55 to 56.6 pts.). However the focus is on wage growth where we have not seen the 3% number since early 2009! 

An in-depth NFP preview can be found here.

 Bitcoin price fell sharply this morning yet the famous coin managed to recoup some of the losses in today’s early trading. In terms of news developments South Korean financial regulators once again targeted cryptocurrency exchanges with their actions and this may explain the early declines. The crypto markets have since stabilised somewhat and currently trade little changed on the day. 

 

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