US equity markets have broken out a record high last night, thanks to the favorable non-farm payroll data. 287k new jobs were created in the US job market last month, higher than any survey expectations. However, if we take into account the poor data from the previous month (38k), the average monthly jobs added over the last two months was about 162k.
On the flip side, improvement in the labour market will fuel expectations of a rate hike this year, and also a stronger US dollar.
The Japanese market rallied on Monday as Shinzo Abe won a sweeping victory in the Japanese elections. He said that policy makers should consider expanding monetary stimulus, and continue to support financial investments with zero interest rates. Abe has always been supportive of quantitative easing, thus his victory has brought more hope to the market that we will probably see a new round of ‘Abenomics’ soon.
Moving forward, there is probably more upside risk than the downside for USD/JPY, as the market now sees a greater chance of the BOJ easing in their next policy meeting at the end of July.
Crude oil and gold have retraced due to a stronger US dollar. An increased number of oil rig counts from the US and Canada weights on oil prices due to increasing production. The next key support level for WTI crude oil is around the $44.20 area.