The first port of call for some Australian market participants this morning, returning to work after a three day weekend and having just caught up on Friday’s all-important US employment report, might be to their IT department to complain the prices on their screens are all wrong.

It’s certainly an eye-opener, in the world of foreign exchange at least, to see the US dollar generally weaker overnight than where it was trading against most currencies in front of Friday’s US data. The narrow DXY dollar index, having gained about 0.9% on Friday with all of the gains coming straight after the payrolls report, is down 1.1% in Monday’s. The AUD/USD rate, that dropped from 77 to 76 cents Friday, is now just back onto a 77 handle.

By way of refresh, headline May US payrolls +280k vs. the 226k estimate, with April revised down by 2k to 221k and March +34k to 119k.  The unemployment rate rose to 5.5% from 5.4% expected and 5.4% previously but on a 0.1% rise in the participation rate to 62.9%.  Average hourly earnings rose 0.3%, lifting the annual rate to 2.3% from 2.2% and to its strongest since August 2009.

The strength of the US data was only surpassed by equivalent data from Canada that saw employment jump by 58.9k.  Ironically, having outperformed even the US dollar on Friday, the Canadian dollar is the weakest G10 currency overnight.

Much of the blame for the abrupt reversal in the dollar’s post-payrolls performance is being laid at the feet of reported comments from US President Obama, attending the G7 Summit in southern Germany at the weekend, that the strong US dollar is a problem. The comment was sourced to a French G7 official, looked odd at the time, and has since been denied by the White House.  No matter, after a brief retracement on the denial, the US dollar has continued to trend lower, led by EUR/USD and which has just move back above 1.13 having fallen to below 1.11 on Friday.

It stems the damage to positioning, from the initially reported remarks, was already done.  The EUR-recovery has also been aided by a fresh, albeit modest, back up in bond yields, 10 year Bunds +4.5bps to 0.876%. In contrast, US Treasury yields have given back some of their pre and post-payrolls rise, 10 back down 2.5bps to 2.382% and post-payrolls high of 2.43%. Equities, that didn’t appreciate the message from the payrolls report – that a Q3 2015 Fed ‘lift-off’ is still on the cards – are weaker across the board Monday, in the US by 0.5-1.0% and after most European indices lost more than 1%.  The Germane Da has now given back over 10% of its Jan-April rally.

The Euro move higher is without benefit of any hard evidence of progress on discussions between Greece and her creditors, even though Greek PM Tsipras looks to be in the process of trying to mend fences with the EU after some of the rhetoric he unleashed in front of his own parliament on Friday and where he said that its lenders should “not humiliate Greece over debt” and called the (EC) proposal “absurd” and “irrational”.  He went on to say “I would like to believe that this proposal was an unfortunate moment for Europe, or at least a bad negotiating trick, and will very soon be withdrawn by the same people who thought it up”. EC President Juncker subsequently spurned an invitation from Tsipras to meet at the weekends according to press reports, a high ranking G7 official quoted saying that Juncker believed Tsipras’ speech left little to discuss.

Overnight we have also had a change in tone from the US, with President Obama saying that Greece must pursue reforms to satisfy creditors. Previously US rhetoric, from Treasury Secretary Jack Lew, et al, has been to the effect that EU leaders should go to any lengths to avoid a so-called ‘Graccident’.  One potentially positive development is wire comment that Greece and her creditors are discussing extending the current Eurozone bailout – currently due to expire on June 30 – until March 2016, though without it seems, much if any change in the conditionality Europe wants attached to any such extension.

Coming Up

Looking ahead to the weak, the key local events are today’s NAB Business Survey, a speech from RBA Governor Stevens Wed, and Thursday’s Labour Force survey. Today’s we’ll also get April home loans data (expected +2/0%).

Internationally, after yesterday’s China trade data which showed export weakness moderating but the annual decline in import growth accelerating – the latter the more worrying development for Australian  – we’ll get CPI data today and then the slug of monthly activity readings on Thursday.

The RBNZ’s OCR decision Thursday is very keenly anticipated, while in the US retail sales on Thursday is the most important release.

Overnight

On global stock markets, the S&P 500 was -0.60%. Bond markets saw US 10-years -2.88bp to 2.38%. On commodity markets, Brent crude oil -0.79% to $62.81, gold+0.4% to $1,173, iron ore  -0.2% to $64.34. AUD is at 0.7702 and the range was 0.7603 to 0.7712.Indicative range today 0.7670 – 0.7730.For more market prices, please see p.2 of the pdf).

For full analysis, download report:

• Markets Today: 9 June 2015 (PDF, 277KB)

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets

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