It’s been a strange week for equity markets with heavy falls for European markets reversing a lot of the gains that we saw in the week post Brexit, though US markets and the FTSE100 have stood out as outperforming, and managing to hang on to a good proportion of their gains thus far this week.

Having got caught up in the euphoria of the prospect of lower for a lot longer interest rates, investors forgot about the vulnerability of the European banking system and its sclerotic banks and soon saw the error of their ways, smashing the Italian banking sector, as well as Swiss giants UBS and Credit Suisse and German giant Deutsche Bank to new record all-time lows.

Later this morning we get the latest UK trade data which is expected to show a £10.7bn deficit for May, of which only £2.8bn is non-EU. Yesterday’s industrial and manufacturing production data came in better than expected for May, however as with most data at the moment the effects of the last month or so won’t be visible for at least 4-6 weeks from now.

The latest NIESR GDP estimate showed that the UK economy saw 0.6% GDP growth in Q2, but most of that came in the first six weeks of the quarter, with a significant slowdown in June, which would appear to be reinforced by this morning’s data showing a sharp drop in consumer confidence to -9 and the lowest levels since December 2013.

A rebound in oil prices on Wednesday evening after a 6.7m barrel draw on API inventories helped drive yesterday’s rebound in European markets after three consecutive days of losses. The size of the draw also raised expectations of a similarly sizeable draw on US inventories and when it didn’t happen oil prices reversed direction quite sharply, dropping through the June lows in the process and pulling US markets down with it to finish rather mixed on the day.

As we come to the end of a turbulent week amidst increasing concerns about the stability of the banking system in Europe, attention now turns to the small matter of the latest US employment report for June.

We learned from this weeks Fed minutes that a number of policymakers expressed concerns about an apparent slowdown in the US labour market after a shockingly low figure of 38k for May. While the figures were slightly skewed by the loss of 35k striking Verizon workers the number was nonetheless a shocker.

These should be added back in to June’s numbers to redress the balance, however the focus on the poor May number rather misses the point that we also saw a 59k downward revision to the March and April numbers, and while the unemployment rate fell to 4.7% this was largely down to a similar fall in the labour participation rate, from 62.8% to 62.6%.

This is why this latest report could well take on an added dimension in that it could answer the question as to whether the May report was an outlier or an indicator of a sharply changing trend in the US jobs market, and justify market expectations of no rate rise this year.

While last month’s “Brexit” vote justified the Fed’s caution in holding rates in June, a decent payrolls report of anywhere near 200k could well reignite expectations of a move on rates in September, especially if average hourly earnings also show evidence of rising as well, with an annualised rise of 2.7% expected.

Market expectations for payrolls are for a number similar to yesterday’s ADP number of 175k, which suggests that the element of surprise is probably tilted to the downside.

A number anywhere in the region of 100k will defer any prospect of a possible rate rise, as will a poor wages number.

EURUSD – still doing nothing as the euro continues to struggle with the bias remaining towards a move towards the March lows at 1.0825. To stabilise we need to see a move back above the 1.1250 area.

GBPUSD – the failure thus far to push back above the 1.3050 level, keeps open the bear flag towards the 1.2000 level which would only be negated with a move back through 1.3150. Support currently at 1.2800 with a break lower targeting the 1.2500 area initially.

EURGBP – while above the 0.8410 area the euro looks set for a move to the 0.8706 area, 61.8% retracement of the big down move from 0.9805/0.6535. A move back below the 0.8400 area would delay this outcome.

USDJPY – has thus far held above the 100 level but while below the 103.50 area the risk remains for a return to the previous lows at 98.95. A move below 100.00 is likely to prompt the risk of further losses and possible BoJ intervention concerns.

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