It didn’t take long for equity markets to shrug off the disappointment of last week’s surprising US jobs number, though the US dollar is struggling a little more. The rebound in commodity prices as a result of the weakness of the greenback helped drive a strong rally in mining and oil and gas stocks yesterday sending the FTSE100 to a one month high.         

US markets also closed higher with the S&P500 managing to close at its highest level this year, strongly outperforming the Dow, which still remains well below its April highs.

Oil prices also continued to gain ground as concern about attacks on Nigerian oil industry infrastructure, and a weaker US dollar helped underpin prices and push Brent to a seven month high.

As financial markets continued to absorb the surprise of last Fridays disappointing May payrolls report it was no surprise to hear Fed chief Janet Yellen pretty much rule out the prospect of a move in June. Her comments that the Fed’s current monetary policy setting is “generally appropriate” pretty much confirmed that given that nothing  is likely to change that view between now and Wednesday week.

She also went on to express disappointment at how weak last Friday’s numbers were, while at the same time not wanting to place too much weight on one bad set of numbers. On balance her comments came across as cautiously optimistic about the US economy and expecting to see rates rise again before the end of the year. Then again she could hardly be expected to react in any other way, but underlying her calm manner there might be a seed of doubt starting to grow.

Unfortunately for the Fed chief this wasn’t one set of bad numbers, given the heavy downward revisions to the March and April numbers as well. Adding to the overall uncertainty we saw the Fed’s labour market conditions index for May hit its lowest levels in seven years at -4.8, which would suggest that a July rate rise is also highly unlikely as well, despite Ms Yellen’s attempts to keep that option open.

The weakness of this indicator along with a downward revision to the April number points to an extremely weak US labour market, in contrast to Fed policymaker’s ongoing bullishness about how strong the US jobs market is. Boston Fed President Eric Rosengren even went as far as stating that with the unemployment rate at 4.7% the US economy was at his estimate of where full employment is.  

What was notable from Ms Yellen’s comment yesterday was the absence of any comment relating to a summer rate rise, contrasting with her comments a couple of weeks ago, which would suggest that in the absence of a strong rebound in the June payrolls numbers, the earliest we could get a move on rates is likely to be September, if at all, given the proximity of the US election.

The pound continues to find itself buffeted by the shifting sands of the latest Brexit polls, with the economic data almost becoming secondary to the news flow from the ongoing UK referendum campaign. After heavy falls early on Monday there was little follow-through on the downside and the pound managed to recover most of its losses by close of play.

The latest British Retail Consortium retail sales numbers for May showed a rise of 0.5% in contrast to April’s 0.9% decline, as consumers reopened their wallets driven by an increase in the sale of clothing in preparation for the summer months. 

The Reserve Bank of Australia left rates unchanged at 1.75% as expected given that they had only just reduced them from 2% in response to a negative CPI print in Q1, despite the fact that since Q1 oil prices have rebounded strongly and in all probability could well see a rebound in Q2.The bank remained downbeat about inflation saying that it expected it to remain low for some time.

EURUSD – while above the 200 day MA at 1.1100, and trend line support from the December lows the bias remains for a move back towards the 1.1400 level and towards 1.1600.

GBPUSD – the inability to push below the May lows at 1.4330 has seen the pound rebound which suggests we could well see a retest of the highs last week at 1.4580. It seems for now that the pound is stuck in a range between 1.4300 and 1.4700 until referendum day, due to a reluctance to push it strongly one way or the other. 


EURGBP – the euro managed to poke its head above the 0.7900 level briefly before slipping back. The big resistance remains at the May highs and 200 week MA at 0.7930. While below here the risk remains for a slide back towards the 0.7820 area. A fall back below 0.7720 retargets the 0.7640 area.

USDJPY – the US dollar managed to find some support at the 106.30 area but really needs to push back through the 108.50 area to stabilise, otherwise it remains looks vulnerable to a retest of the 105.50 lows.

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