U.S. Dollar Strength to Continue Until Inflation Beast is Quelled

The U.S. dollar had an incredible run throughout much of 2022 as the Federal Reserve embarked on its historic rate hiking cycle to curtail the worst bout of inflation in forty years.

US Crude Jumps Above 50-DMA

US crude cleared the all-important 50-DMA yesterday. The barrel of US crude trades a touch below the $72bp level this morning. The next important resistance is seen near $73.50, where stands the 100-DMA.

FTSE 100 Drops Below June Low

At the same time, the FTSE 100 chart gives hope to the bulls, as the price of the index is at the level of the lower line of the descending channel (shown in red), which, it is possible, will show support properties for the FTSE 100, which may lead to a slowdown in the fall or even a short-term rebound.

Bitcoin Wandering in the Range

The main benchmark and psychological obstacle in this upward march is Bitcoin’s $30K level. It manages to go higher within local impulses for a while, but this only strengthens the local selling. Technically, Bitcoin never managed to break out of the narrow corridor, turning from decline to rise with the start of active trading on Thursday.

Sunset Market Commentary

The US ADP labour market report showed another astonishing amount of net job gains (+497k vs +225k expected) in June while US jobless claims more or less leveled (248k from 239k vs 245k expected) below the psychologic 250k barrier. US yields add 5 bps (30-yr) to 15 bps (2-yr) at the time of writing.

ADP Report Another Huge Blow to Fed Pause Hopes, Jobless Claims in Line

Federal Reserve policymakers may well be dreading tomorrow's jobs report now after today's ADP number once again obliterated estimates, coming in more than double the consensus forecast.

Strong ADP Jobs report Shakes Stocks, Boosts USD

ADP released another super strong job report for the US, noting private sector employment growth of 497k in June. This is more than double the expected 226k growth and completely contradicts the idea that the world’s largest economy has entered or is close to a deep recession.

Will Analysts Get NFP Right This Time?

Economists are more optimistic about how many jobs were created in the US last month. But, that might be an over-correction from consistently underestimating the resilience of the labor market this year. But, there are other factors that make predicting Friday's release a little more difficult, meaning there is more chance for volatility in the markets.

Jobs Surprise

So today, the official US jobs data could or could not confirm the strength in the ADP figures, but we are all prepared for another month of strong NFP data, and lower unemployment. If anything, we could see the wages growth slow. If that’s the case, investors could still have a reason to see the glass half full and bet that the US economy could achieve the soft landing that it’s hoping for.

Focus Evidently Turns to US Payrolls

After yesterday’s barrage of ‘hawkish’ US data, the focus evidently turns to the US payrolls. A report slightly above expectations or even in line might already be enough to extend yesterday’s price pattern and push US yields on track of a break beyond key resistance levels (2-y 5/5.12%, US10-y 4.10% area). In theory a growing risk-off also should put the dollar (and the yen) in pole position.