20150703 – UP AS WELL AS DOWN

High Low High Low
EUR/USD 1.1109 1.1081 USD/ZAR 12.2986 12.2335
GBP/USD 1.5624 1.5602 GBP/ZAR 19.20 19.07
EUR/GBP 0.7115 0.7098 USD/RUB 56.09 54.47
USD/JPY 123.19 122.81 USD/ILS 3.7898 3.7558
GBP/CHF 1.4737 1.4701 S&P 500 2,080 2,074
GBP/AUD 2.0630 2.0413 Oil (Brent) 62.42 61.85

If you compare the highs and lows shown in the table above to what I published yesterday you could be forgiven for thinking that both are cut outs of exactly the same day just slightly different timing, perhaps half an hour apart. Prices are not far removed over the last 24 hours, despite the much awaited US non-farm payrolls employment report. The employment data was pretty much in line with expectation, albeit with relatively disappointing average hourly earnings data, which showed no wage growth over the month in comparison to economist forecasts and the previous month numbers of +0.2%. The unemployment rate came in lower than expected at 5.3%, but the participation rate (the percentage of the civilian labour force that is in work, or seeking work) was lower than the previous month at 62.6% and remains at generational lows. I’m no employment expert but it wouldn’t surprise me if demographics, specifically an older population has something to do with this. The bottom line is that I don’t think this employment report affects the decision making process either way. There really wasn’t much to grab on to for the currency markets and I suspect Federal Reserve policy makers will feel the same way. We watched the markets closely as the numbers came out, as is our habit, and after a brief dollar sell off, the markets reversed and were back to where they were, before the number, in no time at all. I can only imagine the dollar sell off was a reaction to the flat wage growth number. Certainly if we had seen signs of accelerating wage demands it would have given US policy makers a strong incentive to begin the normalisation process as soon as possible.


The IMF has published a report which almost gives the impression that the global institution wants to go all in with regards to Greece. The report suggests that Greece should be granted comprehensive debt relief and the maturities on their outstanding debt should be doubled from 20 to 40 years. While this is a balm for Syriza, the governing party in Greece, the report does make the point that the new government has certainly not helped the situation. This weekend promises to be hugely significant with the referendum scheduled for Sunday, but we are already hearing statements from the Greek government that negotiations will continue next week. It makes you wonder when we’ll get a final final decision. It might just be taken out of their hands, as Eurozone central bankers meet on Monday and if they toughen their stance on emergency loans to Greek banks they could effectively make all other discussions redundant if they force Greek banks into bankruptcy. That could be Grexit by force.


Today is a holiday in the United States, we are therefore expecting activity to be relatively muted. Don’t tell that to investors in the Chinese equity markets, as we’ve seen another 4 – 5% decline in the market. Retail investors are learning the hard way – the good way – that stocks can go up as well as down. This is a guideline we will all do well to remember this weekend. The outcome of the referendum could cause a spike in volatility next week, manage your risks accordingly




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