Rates as of 0500 GMT
A day that broke the pattern A few days ago I was looking at volatility, trying to see just how low volatility has gotten as a measure of how sluggish the market is. Then we get this!
Thursdays action also changed another ruleofthumb recently good news for the US economy has been good for stocks and bad news for the dollar. But yesterday the economic news beat all expectations and the dollar soared as a result. The ADP report showed a whopping 978k increase in jobs vs 650k expected if todays nonfarm payrolls equal that, it would even beat the stunning 916k figure from March. Initial jobless claims also fell a tiny bit more than expected to 385k vs 387k expected, in any case falling below 400k for the first time since the pandemic began. And the Institute of Supply Management ISM servicesector index rose to a record 64.0 from 62.7, beating expectations of 63.2 the Markit servicesector PMI was also revised up. At the same time the ISM prices paid figure hit 80.6, the secondhighest on record.
The strong data pushed bond yields higher. However inflation expectations declined, which I find hard to reconcile.
Higher nominal yields lower inflation expectations higher real yields. That boosted the dollar but sent US stocks lower.
As did increased expectations of Fed tightening.
A stronger dollar and higher real yields pressured precious metal prices.
But why AUD and NZD were the worstperforming currencies is a bit of a mystery…