US dollar index barely reacted on positive nonfarm payrolls data - 6.2.2017

Non-farm Payrolls exceeded expectations

US stocks advanced on Friday on positive labour market data for January and corporate news.

US Non-farm Payrolls rose 227 thousand in January instead of anticipated 180 thousand and 157 thousand in December. US president Donald Trump signed an act to change financial regulation. This pushed S&P financial sector index up by almost 2% and S&P bank index up by 2.5%. After the victory of Donald Trump in presidential elections on November 8, 2016, US financials advanced 18% while the banking sector rose 25%. US dollar index edged lower on Friday as investors were disappointed by the weak increase in the average hourly earnings — just by 0.1%. This puts the brakes on inflation and makes the Fed rate hike less probable. Markets price in the 60% chances of the rate hike in June. The additional negative for US currency is lower composite PMI by ISM. US dollar slightly fell on Monday as no significant economic data came out.

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France starts pre-election campaign

European stock indices advanced on Friday together with euro as services and composite PMIs by Markit rose in January.

The additional positive factor was the strong quarterly earnings of such companies as Beazley, Hexpol and Skanska. Euro weakened on Monday while European stocks fell. This happened amid higher political risks ahead of the presidential elections in France. The governing socialist party set up Benoît Hamon as a candidate. According to the recent forecasts, he may count only on the 4th place in the 1st round of presidential elections. The elections will take place in two stages: on April 23 and May 7, 2017. The additional negative for the European producers was the news on the first in Europe big suit against the German automaker Volkswagen. It concerns the “diesel scandal” which previously broke up in US. The positive data on higher factory orders came out in Germany on Monday. This limited the potential decline in currency and stock markets.

Nikkei is traded in a narrow range awaiting the meeting of Trump and Abe

The Japanese yen strengthened on Monday for the 3rd straight day. Investors consider it as a safe-haven asset amid rising risks in US and Europe. The Nikkei index continued trading within a narrow range for the 5th straight trading day. The investors’ activity was subdued as they were awaiting the outcome of the Japan’s prime minister Shinzo Abe and US president Donald Trump meeting that shall take place on February 10-11, 2017. The Japanese PMIs, service and composite, edged lower in January, the data came out on Friday. No significant economic data came out on Monday.

US rigs count continues advancing

Brent oil continues trading in a narrow range just below the level of $57 a barrel. Its prices are supported by the higher political risks amid new US sanctions against Iran. In its turn, higher active rig count in US has a negative impact on the oil. Their number rose by 17 units last week to 583 which is the highest since October 2015. The oil service Baker Hughes forecasts that this year US rig count may reach 692. Some market participants are more optimistic and expect them to rise to 795 units till the end of 2017. The net longs in oil reached their historical high as on January 31, 2017, according to the U.S. Commodity Futures Trading Commission.

Sugar prices surged after the Green Pool company cut the forecast of its crops in India to 20.3mln from 20.5mln. This may force India to import up to 1.5mln sugar tonnes this year.