• Non-Farm Payrolls beat/do not meet analyst estimates
  • IMF to Yellen: Pretty please, don’t raise interest rates this year?
  • Greece’s payments bundled into June 30 deadline
  • OPEC, surprising no one, maintains current oil output

The US Non-Farm Payroll number was released this morning. The 280K number released didn’t just beat the analysts’ consensus of 225K, it clobbered it. This will have long-term as well as short-term implications to the strength of the USD/EUR, as major indicators become more and more crucial to figure out the timing of the first interest rate hike since before the Recession. The furious bund selloff of this week has strengthened the EUR against the USD. Here’s the past month for the EUR/USD via Yahoo Finance:

june-5 graph

The IMF urged the US central bank to refrain from raising interest rates for the rest of this calendar year. The report cited “risk of disinflation, policy reversal and ending back at zero policy rates,” a real risk considering that US GDP shrank .7% in Q1. “Data-dependent” is a pretty unambiguous term, after all.

The IMF, with the altruistic air of a mogul generously giving a debt extension to his peon, chose to bundle all four of Greece’s repayments this month into one, due on June 30. These payments add up to €1.5 billion; a small sum for many US corporations but a large one for a country who’s GDP has shrunk 26% since 2008. Greece owes the IMF about €30 billion, so the latter is willing to make concessions in order to squeeze any money it can before Greece almost inevitably defaults.

At some point the ECB will no longer extend the massive bailouts it has given Greece. The more than €240 billion it has already given is more than Greece’s 2014 GDP. When that happens, the gains of the Euro will reverse. If this motion is paired with a pickup of the US economy in Q2, the USD/EUR will resume its headlong rally it has recently reversed.

The other big millstone around the USD’s neck has been the rally in crude prices. OPEC has decided to keep doing exactly what they are doing, so the biggest factors for WTI crude prices will continue to be inventory and rig count, both of which have been on a steady decline since the freefall of crude started last year. After the 19-month high PMI result for May was released on Tuesday, CAD/USD strengthened to 1.2491, but a huge reversal took place after NFP numbers came out this morning. Short and sweet victory for CAD/USD.

AUD/USD strengthened on stronger than expected Q1 growth numbers released earlier this week but saw a reversal due USD strength that emerged from Non-farm Payrolls figures. The pair will see more volatility next week when Australian employment and participation figures are released on Thursday.

USD/JPY has been strengthening violently in the last couple weeks. Look for it to continue to do so with the high US NFP numbers and future easing for JPY.