Eyes on US jobs report after week of volatility

• Amazon stock falls 1% after Q1 sales, profit outlook disappoints
• European bourses make fresh record highs as tariff pressures ease
• BoE cuts interest rates and halves growth forecasts, sticks with ‘gradualism’
• NFP expected to return to underlying trend pace of growth

FX: USD steadied after three days of selling as markets look to the jobs report. We, and everyone, are kind of figuring out price action from the last few days. Importantly, the index didn’t make fresh y-t-d highs on Monday’s move. That rejection is important, though we think the dollar will still hold an underlying bid. But we will definitely see periods of weakness on relief rallies if the tariff premium unfolds. The October 2023 high at 107.34 is initial support.

EUR traded modestly lower after testing 1.0448 on Wednesday. Interestingly, German factory orders were stronger than expected which could point to some stability in the manufacturing sector. That said, tariffs and the upcoming German election are the key focus.

GBP sunk to a low of 1.2359 before paring losses through the day after the BoE press conference. The bank cut rates as expected, but the 9-0 vote split was surprising. We warned this could be a dovish shock in our preview and having arch-hawk Mann vote for a 50bps rate reduction sent GBP reeling. But Governor Bailey cautioned markets later on the reaction to the vote. The MPC maintained their gradual stance to policy easing, though growth forecasts were reduced more than most predicted. Inflation projections still looked elevated, and markets now expect around 60bps of cuts this year.

USD/JPY made fresh lows for the breakdown move on comments from a hawkish member of the BoJ. He said rates would rise above 1% by early next year, cementing market pricing for more hikes.

AUD printed a very narrow range inside day in quiet trade. The 50-day SMA has capped the upside recently and resides at 0.6288. USD/CAD also had a relatively quiet day after the huge volatility earlier in the week. Positioning is still very short the loonie so continued better tariff news could finally see a breakdown through the 1.43 lower end of the recent range. Canada jobs data is forecast to see around 25k jobs added and the unemployment rate tick up to 6.8%.

US stocks: The benchmark S&P 500 closed in the green, up 0.36% at 6,083. The tech-heavy Nasdaq settled higher, up 0.54% at 21,774. The Dow Jones finished down 0.28% at 44,747. Tech led the gains while defensives lagged. Tesla dropped over 2% at one point as disappointing European car sales saw the stock move lower through $380 support. Amazon modestly fell after the closing bell as it reported beats on the bottom and top lines but worse than anticipated Q1 guidance. These earnings come after cloud rivals Microsoft and Google missed on expectations for cloud sales in the quarter.

Asian stocks: Futures are mixed. Stocks tracked the positive moves Stateside as Treasury yields fell. The ASX 200 outperformed with the index led higher by strength in financials and gold-related stocks. The Nikkei 225 regained the 39,000 level but comments from hawkish BoJ official Tamura saw the yen strengthen and stocks retraced. The Hang Seng and Shanghai Comp were buoyed by the lack of major escalation on the trade front. Tariff headline havoc will play a major part in price action going forward.

Gold took a breather after five straight days of gains. We cautioned that we were in overbought territory recently. Strong support no doubt sits around the prior record high at $2790. All eyes are on the NFP report.

Day Ahead – US Non-Farm Payrolls

It’s NFP day! As if markets haven’t had enough thrills and spills this week, the first Friday of the month means we get the US monthly jobs data. Consensus expects around 170k jobs added, which is just above the six-month average of 165k but below the prior blockbuster 256k. Unemployment is seen steady at 4.1% and earnings unchanged at 0.3%. There is the possible complication about the annual benchmark revisions, as last year the BLS overestimated the figures by around one third, or 818k.

It seems with the market still long USD, a bigger move will come from a soft report. That would dent the “US exceptionalism” theme modestly, though rate cuts are some way off with the Fed’s prolonged pause on policy now consensus. We’d likely see more profit taking in the greenback though the tariff story lingers. We also get US CPI figures to look forward to next week.

Chart of the Day – Breakdown in USDJPY continues

We have been favouring long yen trades, especially in the crosses as a trade for this year. The crosses are a great way of expressing this as they are less hostage to tariff volatility. Hawkish talk from various BoJ officials has hit the wires this week. Along with the 10-year US Treasury yields breaking down, that has caused a similar fall in the major through support around 154. We also note US Treasury Secretary Bessent has emphasised Trump’s focus on lowering 10-year yields.

Prices hit the 200-day SMA at 152.71 and 100-day SMA at 152.59 on Wednesday. We are now just below a major Fib level (38.2%) of the September bull trend at 151.50. A soft NFP could mean we drop towards 150 and then the midpoint of that move at 149.22 which tallies with the support zone from December. Strong jobs data may see a bounce back towards the SMAs with resistance above at 154.23.

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