Financial market research and analysis

Wall Street ended Friday over 300 points higher as investors shrugged off a poor US jobs report, focusing instead on a rally in Apple, lifting it to fresh all-time highs. Yet Wall Street’s strong session on Friday was unable to prevent the Dow and the S&P posting a second straight week of losses. The Nasdaq bucked the trend ending 1.7% up on the day and 1.4% up on the week, supported by Apple which rallied 13.9% across the week, hitting an all-time high of $183.89.

The US jobs report failed to hit expectations on the headline figure or on wages. It was the unemployment rate falling below 4% that grabbed all the attention. Overall this wasn’t a hugely exciting jobs report, yes it missed forecast but not by enough to change the course of direction of the Fed; a rate hike in June is still widely expected.

Dollar rallies for three straight weeks

Dollar strength has been a big story over the past few weeks, with the dollar hitting its highest level since December on Friday at $92.60. Not even the lacklustre non-farm payroll report was enough to dampen the rally in the dollar, which extended for a third straight week.

Dollar strength and pound weakness ensured that GBP/USD was one of the worst performing currencies last week. The pair hit a 4-month low, sub $1.35 as pound traders reassessed the likelihood of the BoE hiking rates when they meet this week following a flurry of weak data. Whilst the Fed raised interest rates in April and looks set to do so again in June, the BoE meet this week and the outcome is not expected to be as pound-beneficial as was being priced in just one month ago. BoE England Governor Mark Carney took the opportunity in an interview to lower expectations of an imminent rate hike, which combined with a strong dollar, pulled GBP/USD dramatically lower.

BoE in focus ahead of Super Thursday

The pound set off on the front foot versus the dollar at the beginning of the new week, taking the pair north of $1.35. Yet the move could be short lived if Mark Carney continues to sound as dovish as he has recently. A more cautious BoE would increase the divergence in policy between the BoE and the Fed, weighing on sentiment for  GBP/USD.

Emerging markets in for more pain?

Emerging market traders are bracing themselves for further turbulence ahead as a stronger dollar has prompted a wave of selling of emerging market currencies, stocks and bonds, in a move which could still have more to come. Argentina, amid high inflation and a crippling deficit, responded to the hit on the peso by hiking rates three-time from 27.5% to 40% within the week. If the stronger dollar turns out to be a more permanent fixture on the boards then we could expect to see a more sustained, longer lasting sell off in emerging markets.

Europe points higher, FTSE closed

Friday’s positivity on Wall Street spread into Europe over the weekend and is looking to lift European bourse on the open. Whilst the FTSE will remain closed for the public holiday, markets across the rest of Europe and the US are due to open.

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