Joshua Mahony MSTA
Scope Markets
- FTSE falls amid fundamentals volatility
- ADP NFP ruins positive US data day
- US dollar resurgence highlights possible June hike
The positivity of April seems a distant memory, as yet another day in the red has brought about a new four-week low for the FTSE today. The fundamentally driven unpredictability evident across financial markets today are providing a preview for the remainder of the week, where volatility is set to heighten as we crescendo towards Friday’s US payrolls release.
Today’s abundance of US data has made for a difficult trading environment, with contrasting data points providing mixed expectations for monetary policy implications. The overwhelmingly positive release of services and composite PMI readings helped paint an encouraging picture for US business, with improved factory orders and trade balance helping raise rate hike expectations for the June meeting. However, the picture has been muddled by a shockingly poor April ADP non-farm payrolls number, which at 156k fell to the lowest level in over two years. The ADP reading is the only figure of the day that has a second bite at the cherry and if Friday’s headline figure confounds today’s ADP weakness, we are likely to see a significant rise in June rate hike expectations.
The resurgence of the US dollar this week has sent shockwaves throughout the FX markets, as traders begin to realise that perhaps a 15-month low in the dollar index makes little sense just six weeks away from an increasingly ‘live’ FOMC meeting. While markets are currently pricing in just a 12% chance of a June hike, the reality is likely to be higher, given the hawkish tone of recent Fed member comments.
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