APAC Morning Update - 31/03/21

The NZDUSD opens at 0.6978 while the AUDUSD opens at 0.7592

All quiet on the southern front as the market remains poised for the US Non-Farm payrolls over the weekend. Initially the thought was that this data may be a little irrelevant, as unless it was an absolute shocker it probably wouldn’t change the narrative of a strong, fast recovering US. On second thoughts, the impact may have been underestimated.

Remember the Fed has two main objectives - inflation around 2% and low unemployment. For now the market is not expecting any change in rates till at least 2023, if that. However, the Fed is constantly flagging they expect inflation to tick up, albeit that it will be transitory. So if this happens, and they are suddenly meeting their inflation target AND we get a really good jobs number and unemployment drops down, very soon the market is going to revise that 2023 date and the pressure will be on the Fed to explain their very dovish stance.

So 6.5% growth, trillions in stimulus, low unemployment, inflation higher than 2%, and rates are at 0%. Why? And you are still printing. Why? These questions will become increasingly hard to answer, and pretty soon will get to a point where the market may not even believe the jawboning. Moral of the story is a really strong jobs number is indeed relevant, and should directly flow into USD strength.

Global equity markets are generally up: Dow -0.7%, S&P 500 -0.2%, FTSE +0.5%, DAX +1.3%, CAC +1.2%, Nikkei +0.2%, Shanghai +0.6%.

Gold prices are off 1.6%, currently trading at $1,681 an ounce. WTI Crude Oil prices are also off 1.6% trading at $60.5 a barrel.