When the market took a look at the higher salary data following the release of the non-farm payroll report, there was a rebound. In the end, though, bonds saw a robust buy and there was a growing perception that the Fed is likely finished, which Goldman Sachs reaffirmed in a report. Although the data didn’t cause much of a shift in Fed probability, the market is becoming more convinced that the economy is slowing, thus there is only a 30% possibility of another raise.

Regardless of the quantity, I also have a strong suspicion that bond purchasers were lining up in the shadows to purchase Treasuries. This week, 30-year rates increased by as much as 30 bps, but buyers would have been hesitant to invest for fear of being burned by yet another positive employment report. They took action when the data was deemed to be “good enough,” which caused yields to fall and the dollar to follow.

At first, the dollar exchange rate remained constant, although notably favorable for the euro and the pound. In the wake of that, the latter increased to its highest levels of the week, and USD/JPY followed in as it dropped under 142.00.
As stocks faltered later in the day, stock markets had a little comeback. Early strength in the stock market was followed by a 1% decline during the course of the day. Due to this, commodity currencies were hammered particularly hard, and despite improvements for oil and gas, CAD fell to the bottom of the heap.

The US CPI data is due out next week, and that one will also be significant as the market switches its focus from worrying about future Fed raises to wondering when the cuts will start in 2024.

  • Gold is up $8 to $1941
  • US 10-year yields are down 14.5 bps to 4.04%
  • WTI crude up $1.10 to $82.65
  • EUR leads, CAD lags
  • S&P 500 down 24 points, or -0.5%

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