USD/ DXY: NFP FAILS TO ANSWER SEPT HIKE & FED LACKER SPEECH
The USD Jobs report missed expectations across the board with the print, earnings and URate the like. Market reaction was interesting to say the least, initally we said dollar trade aggresssively on the offer, however not for long. it was USD bulls who look to have closed the day winning. On reflection this makes sense given fed funds rate held up relatively well only shedding 3pcts, and 150k jobs is still well above the 50-75k target needed to maintain employment levels which have been stated by a few Feds already as "at full employment".
USD positioning:
Initially I was a $yen bear, however offers there were squeezed out on the break above 104 likely on yen supply as risk markets moved higher and some dollar demand as jobs added was significantly more than Fed Mester said this week was enough to maintain the economy at full employment (50-100k jobs). Instead my focus now has moved to Equities market where I added SPX shorts at 2180 average price and hedged some of that exposure with some pre-existing Apple longs from earlier in the week when EU Tax allegations brought the stock into the low 105s.
USD FX trading from here imo will remain very choppy as there once again remains no clear consensus on medium-run positioning/ further hikes from the Fed as US data continues to trade below expectations, thus I will adjust my strategy to suit (tone down FX positioning) whilst look to add some cross asset positions instead. I will however continue to be on the lookout and post if there is any statistical opportunities, as these are tradable in any environment.
$Yen I will also watch closely and also GBP Services PMI data on Monday will be vital to STG trades.
Fed Lacker Speech Highlights:
Fed's Lacker: Fed Rates Should Be 'Significantly Higher' Based On Rules
Lacker: Rate Benchmarks Are Good Guide For Setting Fed Policy
Lacker: Economy Continues To Make Progress On Jobs, Inflation
Lacker: Current Jobless Rate Essentially At Full Employment Level
Lacker: Taylor Rule Points To 3.3% Fed Funds Rate For Third Quarter
Lacker: Economy Adding Jobs At Double Pace Needed For Population Growth
Lacker: Inflation Moving Back To 2% Price Target
Lacker: Fed Could Deal With Inflation Problem With Rapid Rate Increases
Lacker: Rapid Rate Increases Would Cause Pain To Economy
Lacker: More Attention Should Be Paid To Inflation Risks
Fed's Lacker: Level of Discouraged Workers Not Historically Elevated
Lacker: Some Uncertainty Around Exact Level of Full Employment
Lacker: Reverse Repos in Place as Long as Needed, May Not Need in Future
USD positioning:
Initially I was a $yen bear, however offers there were squeezed out on the break above 104 likely on yen supply as risk markets moved higher and some dollar demand as jobs added was significantly more than Fed Mester said this week was enough to maintain the economy at full employment (50-100k jobs). Instead my focus now has moved to Equities market where I added SPX shorts at 2180 average price and hedged some of that exposure with some pre-existing Apple longs from earlier in the week when EU Tax allegations brought the stock into the low 105s.
USD FX trading from here imo will remain very choppy as there once again remains no clear consensus on medium-run positioning/ further hikes from the Fed as US data continues to trade below expectations, thus I will adjust my strategy to suit (tone down FX positioning) whilst look to add some cross asset positions instead. I will however continue to be on the lookout and post if there is any statistical opportunities, as these are tradable in any environment.
$Yen I will also watch closely and also GBP Services PMI data on Monday will be vital to STG trades.
Fed Lacker Speech Highlights:
Fed's Lacker: Fed Rates Should Be 'Significantly Higher' Based On Rules
Lacker: Rate Benchmarks Are Good Guide For Setting Fed Policy
Lacker: Economy Continues To Make Progress On Jobs, Inflation
Lacker: Current Jobless Rate Essentially At Full Employment Level
Lacker: Taylor Rule Points To 3.3% Fed Funds Rate For Third Quarter
Lacker: Economy Adding Jobs At Double Pace Needed For Population Growth
Lacker: Inflation Moving Back To 2% Price Target
Lacker: Fed Could Deal With Inflation Problem With Rapid Rate Increases
Lacker: Rapid Rate Increases Would Cause Pain To Economy
Lacker: More Attention Should Be Paid To Inflation Risks
Fed's Lacker: Level of Discouraged Workers Not Historically Elevated
Lacker: Some Uncertainty Around Exact Level of Full Employment
Lacker: Reverse Repos in Place as Long as Needed, May Not Need in Future
-Lacker: Fed Should Have Raised Rates in July
-Lacker: Open Minded About September FOMC, Worries About Getting Behind Curve
-Lacker: 25 Basis Points Is Ideal Size For Fed Rate Moves
-Lacker: Aggressive Rate Rises Risk Chance of Fed Overshooting
-Fed's Lacker: August Jobs Data 'Reasonably Strong'
-Lacker: Labor Markets Are Continuing to Tighten
-Lacker: Inflation 'Clearly' Moving Back Toward Target
-Lacker: Raising Inflation Target Would Be Terrible Idea
-Lacker: FOMC Not Divided, But Officials Have Different Perspectives
-Lacker: Accepts There's Now a Lower Natural Rate of Interest Now
-Lacker: Dot Plot Remains Valuable, Shouldn't Be Ended
-Lacker: Election No Impediment to Raising Rates