Daily Market Analysis

Markets Playing on Defence Ahead of US Jobs Data

March 10, 2023

Markets across Asia today were playing on defence ahead of the key US jobs data, the result of which could cement investor fears of the Fed hiking by 0.5% at their next meeting should we see an NFP print well north of the 200k level. January’s bumper jobs report (of 517k) continues to reverberate around financial markets such was the level of upside surprise, so understandably traders are taking an ultra-cautious approach ahead of the February report. In fact, the saying ‘Once bitten, twice shy’ could be used to describe the market mood today ahead of the upcoming NFP (Non-Farm Payrolls) print. Fed Chairman Jerome Powell earlier this week set the tone for a more aggressive Monetary Policy approach in the quest to tame inflation, now traders are anxiously waiting to see if the case for a 50-basis point increase at the next FOMC meeting is justified by the latest jobs market data.

Wall Street traded steeply lower during the Thursday session and on Friday the major Asian indices all followed suit with the ASX, Nikkei and Hang Seng all trading in the red. In Japan, Governor Kuroda today had his final BOJ meeting, with the central bank announcing no change to current monetary policy settings (as expected). With the BOJ reaffirming their dovish stance on monetary policy and with no yield change in sight for the Yen, the USDJPY rate spiked higher today on the BOJ announcement. However, with the 200-day moving average proving to be a stubborn technical barrier to overcome this week (as seen in the chart below), it remains to be seen whether Yen weakness persists. Much will depend on how US treasuries and the USD react to the upcoming NFP.

USDJPY chart:

Elsewhere in FX, the AUD remains out of favour with investors as it sinks further away from the psychological 0.70 level that it touched in February. Currently, the AUDUSD rate is hovering below the 0.66 level. Further downside is possible should a strong US Payrolls number stoke interest rate fears which in turn boost the greenback. Alternatively, should we see US jobs data miss the mark on the downside, markets may pare back their Fed rate-hike expectations and recessionary fears, and this could give the AUD a reprieve from its recent downside momentum.

The gold price has been stuttering around the US$1830 level today (during Asian market hours) with traders reluctant to take new positions ahead of the key event risk in the form of US NFP. If the US jobs numbers were to come in softer than anticipated, some steam could be taken out of higher yielding assets such as the USD which could work in the favour of the precious metal.

Overall, markets are playing the waiting game ahead of the non-farm payrolls report, the result of which will likely dictate the risk appetite or otherwise of traders heading into next week.

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