Friday saw any hopes of a June rate hike by the Fed all but disappear as poor jobs data indicated that Non-Farm Employment Change tanked to 38k vs the expected increase of 159k. The lower than expected number had markets running to cover USD longs and added selling pressure to the green back against all pairs as the US Index dropped to below 94.00. Elsewhere commodities and equities rallied as the sentiment for cheap money for longer gripped markets.
Currently the impact has softened as we see profit taking across the board and contrarians stocking up on a cheaper USD and selling commodities and stocks at relatively bargain levels. All eyes will be pointed at Fed Chair Yellen today as she is due to deliver a Speech in Philadelphia later today and markets wait to see if she maintains her recent stance of an “appropriate rate hike in coming months”. Should her rhetoric soften we would expect another wave of USD selling as markets further price in the extended period of lower interest rates. However, should she stand by her resolve and downplay Friday’s numbers, we would see the USD regain much of Fridays loss as commodities and equities drop once more in preparation of a rate hike.
Elsewhere, the AUD makes our watch list as we expect the RBA to release the current Cash rate (expected to remain unchanged at 1.75%) and it’s Rate Statement in which it will outline its views on the Australian economy and the banks future focuses. Should the RBA strike a dovish tone, we would see the AUD weaken across the board and vice versa in the case of a more hawkish tone.