Market Drivers April 14, 2016

AUD Labor data mixed but it holds bid
EZ CPI turns flay
Nikkei 3.23% Dax 0.6%
Oil $41/bbl
Gold $1244/oz.

Europe and Asia:
AUD AU Labor 26K vs. 18K
EUR CPI 0.0% vs. -0.2%

North America:
GBP BOE Minutes 7:00
CAD HPI 08:30
USD CPI 8:30

Australian dollar took off in early European trade today running to the 7700 cent figure on the back of AU employment data that beat expectations.

AU Labor figures came in at 26K versus 18K eyed and the unemployment rate dropped to 5.7% from 5.8% anticipated. Although the headline numbers looked upbeat, the underlying data was far less bullish than it would appear. All of the gains were actually in part time jobs and full time employment actually shed -8.8K positions. Furthermore the trend growth data which is designed to smooth the noisy month to month results is showing a deceleration in growth to 2.2% in March from 2.6% in December of last year. Lastly the the trend monthly hours worked in all jobs series decreased by 1.8 million hours (0.11%) to 1,643.7 million hours.

None of these data points were unabashedly bullish and Aussie actually sold of a bit in the aftermath of the release, but the unit found a very strong bid in European trade climbing more than 70 points in a few hours. The net takeaway from today’s AU employment report is that despite the deceleration in job growth trend the RBA will remain stationary for the foreseeable future protecting Aussie’s 2% yield and which will in turn attract more carry trade flows into the pair.

Elsewhere the action was quiet with cable seeing a bit of a wobble on purported reports that BOE minutes would reveal that two members argued for a rate cut. Cable dipped below the 1.4100 figure but found a bit of support at that level. The 1.4000 level remains critical to GBP/USD support and a break there could quickly usher in a test of the recent 1.3800 lows. Although the fears over Brexit have lost some of the momentum the latest polling shows a stubborn tie between the Leave and Stay camps and still leaves the prospect of an exit on the table.

In US today the CPI figures will be the dominant release of the day with market looking for little change in the numbers. Yesterday’s weak Retail Sales were a big disappointment to dollar bulls but USD/JPY remains bid at the 109.00 level in a clear sign that the pair is grossly oversold and looking for any catalyst to rally, therefore any positive surprise this week could still push the pair towards 110.00 this week.

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