US June payrolls up by 224k vs 160k expected

Marius Paun | London, UK | Senior dealer | Wednesday, 05th June 2019

Gold tumbled to $1383 on the back of a stronger USD, following a positive meeting between Chinese and US Presidents over the weekend. Nonetheless the sell-off was rather short lived and a rebound soon followed with the precious metal pushing back above $1430 within two days. Hitting perfect technical retracement levels.

The highlight of the Trump-Xi meeting at G20 summit is that both sides have agreed to restart trade talks and there will be no new levies on Chinese goods. Meanwhile the focus shifted with and the US proposing to add more tariffs to $4 bln worth of EU goods.

China’s June Caixin Manufacturing PMI came in at 49.4 vs 50.1 anticipated. It is the second lowest reading since June 2016 showing a contraction in manufacturing as the overall economy slips further into the red. However Premier Li Keqiang was adamant earlier in the week that China will not resort to yuan devaluation.

ECB policymakers seemed confident they don’t need to add monetary stimulus in July preferring instead to wait for more data on the economy (no mention of QE). EURUSD was on the downside for the whole week testing lows of 1.12 at the time of writing. Meanwhile EU leaders agreed to appoint Christine Lagarde (the current IMF chief) as the next ECB President

OPEC agreed to extend the production cuts by an additional 9 months, concerned with the excess oil supply from the US. The trade truce is seen as bullish for global growth but the rally in oil prices was short lived as the markets came off the highs.

On Friday, the US nonfarm payrolls report showed 224k jobs were added in June, a lot higher than markets had anticipated. In reaction, the Dow fell 100 points and gold prices slipped below $1400 (hovering around $1415 before the announcement) amid a strengthening US dollar. Analysts were quick to speculate the numbers would now make it much harder for the Fed to justify a rate cut at the next meeting ( if it wasn’t for a meddling President who has three words in regards to monetary policy ‘cut cut cut’….).

The pound sterling started the week on the back foot due to ongoing poor UK data. It fell below the previously good support level of 1.25 USD after the US jobs report.