US job growth far below expectations in April amid labor shortages
|The US Dollar has got hammered after the US April jobs data missed expectations by a huge margin on Friday. The headline NFP came in at 266k against expectations of 1000k. The weak data print would cause the markets to align with the Fed communication of extremely gradual withdrawal of accommodation. US 10y inflation expectations have risen to the highest since 2013, crossing the 2.50% mark.
The US 10y had fallen to 1.48% but has rebounded to 1.59%. Real rates however continue to remain low. This is weighing on the Dollar. The dollar has weakened across the board. The Dollar index is threatening to break the 90 marks again. Commodity currencies and EM currencies have rallied. US equities continue to print new record highs.
The pro-independence Scottish National Party delivered a strong performance in the Scottish elections, falling short of a majority by just 1 seat. This could raise fresh concerns about a push for a second referendum for Scotland to exit the UK. A cyber attack on oil infrastructure facilities in the US could disrupt supply and put upward pressure on crude oil prices.
While the domestic COVID situation still continues to remain grim, the global risk sentiment should keep INR assets supported. The Nifty could reclaim the 15000 marks again in trade today. 14500 continues to remain very crucial support for the Nifty. Metals and energy stocks are likely to continue outperforming.
The primary issuances in the corporate bond market have dried up, especially at the longer end. A bit of SDL supply is now being seen. G-sec auction went through smoothly on Friday. Domestic April CPI data is due this week. 10y is likely to trade a 5.95-6.12% band for the week. The cash Tom points and forwards have now completely normalized.
Strategy: Exporters are advised to cover a part of their near-term exposure on upticks towards 74.00. Importers are advised to cover through forwards on dips towards 72.90. The 3M range for USDINR is 72.50 – 75.50 and the 6M range is 73.00 – 76.50.
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