Global Markets Update: US Jobs Report, China Exports, and Emerging Market Currencies

Strategic Insights -

As the global economy remains uncertain, the recent US jobs report and China's rare earth exports have sent mixed signals to investors. The dollar index has largely unwound its pre-weekend gains, while major currencies such as the euro, yuan, and yen have shown significant fluctuations.

Key Takeaways:

  • The US jobs report, despite being better than expected, failed to spark a sustained buying rally in the dollar index, which remains confined to last Friday's range.
  • China's export control of critical metals and magnets has put pressure on the US and European auto makers, highlighting the growing tensions between the two nations.
  • China's producer prices fell 3.3% year-over-year in May, deflationary forces continuing to grip the country, which may impact its trade surplus.
  • Japan's Q1 GDP was revised to show stagnation, rather than contraction, with a 0.6% contribution from inventories and a 0.8% subtraction from net exports.
  • Sterling has stalled after setting a new three-year high, trading firmly inside last Friday's range, and may probe the $1.3600 area in North America.
  • The Canadian dollar has recovered from new lows last Thursday, with the US dollar reaching slightly above CAD1.3700 ahead of the weekend.
  • The Australian dollar has returned to its pre-weekend levels, trading around $0.6530-5 in Europe, with a retracement target of $0.6550.
  • The Mexican peso has risen by about 1.7% last week, its largest gain since late January, and is drawn gradually toward the MXN19.00 area.
  • The central bank meets next on July 8, with the futures market discounting a little more than an 85% chance of a cut in interest rates.

Statistics:

  • The US dollar index traded firmly ahead of the weekend, but has failed to sustain gains, with the low at around 98.65 and a high of 98.80.
  • The euro was under pressure ahead of the weekend, with the low near $1.1370 and a high of $1.14.5 in Europe.
  • China's producer prices fell 3.3% year-over-year in May, with the core rate excluding food and energy up 0.6%.
  • Japan's economy stagnated in Q1, with consumption revised to 0.1% and a 0.6% contribution from inventories.
  • Sterling has traded in a narrow range, with the low near $1.3500 and a high of $1.3585 in Europe.
  • The Canadian dollar has recovered from new lows, with the US dollar reaching slightly above CAD1.3700 ahead of the weekend.
  • The Australian dollar has returned to its pre-weekend levels, trading around $0.6530-5 in Europe.
  • The Mexican peso has risen by about 1.7% last week, its largest gain since late January.

Sources:

  • Bloomberg (various sources)
  • Reuters (various sources)
  • CNBC (various sources)
  • Wall Street Journal (various sources)
  • Financial Times (various sources)