Dollar is trying to recover in early US session after much stronger than expected non-farm payroll job growth. Nonetheless, upside is capped so far, considering the surprised jump in unemployment rate too. For now, Aussie remains the strongest one for the day, followed by other commodity currencies. Yen is the worst performer, followed by Swiss Franc and then Euro.

In Europe, at the time of writing, FTSE is up 1.10%. DAX is up 1.10%. CAC is up 1.39%. Germany 10-year yield is up 0.0490 at 2.298. Earlier in Asia, Nikkei rose 1.21%. Hong Kong HSI rose 4.02%. China Shanghai SSE rose 0.79%. Singapore Strait Times rose 0.24%. Japan 10-year JGB yield dropped -0.0048 to 0.416.

US NFP rose 339k, unemployment rate rose to 3.7%

US non-farm payroll employment grew 339k in May, well above expectation of 180k. The figure was in line with the average monthly gain of 341k over the prior 12 months.

Unemployment rate rose from 3.4% to 3.7%, above expectation of 3.5%. Labor force participation rate was unchanged at 62.6%. Number of unemployed persons rose by 440k to 6.1m.

Average hourly earnings rose 0.3% mom, matched expectations. Average workweek edged down by -0.1 hour to 34.3 hours.

ECB Panetta: Policy debate to shift from ‘how high?’ to ‘how long?’

In an interview with Le Monde, ECB Executive Board Fabio Panetta noted, “Given the extraordinary level of economic uncertainty, estimating the terminal rate is challenging.”

“I don’t think this is the time to be too hasty in raising rates, given the considerable ground we have already covered.” He added “my intuition suggests that we have not reached the end of our rate-hike cycle, though we’re not far away from it.”

As for the future of ECB’s monetary policy, Panetta indicated a shift in focus. “I think the policy debate will soon shift away from ‘how high?’ to ‘how long?’,” he stated.

He identified the strength of the labour market and firms’ profit strategies as the main threats to price stability but pointed out, “so far there are no clear indications of a self-sustained wage-price spiral.”

In addressing core inflation’s lagging pattern behind headline inflation, Panetta observed, “it (core inflation) is now proving to be persistent even after energy inflation has gone down. But we can expect it to come down eventually too. In this respect, yesterday’s figures are encouraging.”

He concluded by warning that the effects of ECB’s monetary tightening could potentially lead to “a prolonged weakness in economic activity or even a technical recession” if domestic demand continues to falter.

BoJ Ueda: No time frame to achieve inflation target, but not so long as 10 years

In a parliamentary address today, BoJ Governor Kazuo Ueda said “The time it takes for the impact of monetary policy to appear on the economy could move around a lot depending on circumstances.”

“We therefore do not have any time frame in mind” in achieving the inflation target, he added.

“Having said that, our baseline view is that it won’t take so long as over 10 years. We’ll still seek to hit the target at the earliest date possible,” he remarked.

Ueda reiterated that the Bank of Japan’s purchases of Real Estate Investment Trusts (REITs) form part of their expansive monetary easing strategy. He noted, “We are conducting the purchases (of REITs) as part of our massive monetary easing program. Given it will take more time to achieve our price target, we will maintain the easy policy.”

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9034; (P) 0.9076; (R1) 0.9097; More

USD/CHF recovers ahead of 0.9013 minor support but stays below 0.9146 temporary top. Intraday bias remains neutral first. On the upside, break of 0.9146 will resume the rebound from 0.8818 to 38.2% retracement of 1.0146 to 0.8818 at 0.9325. On the downside, however, break of 0.9013 will turn bias back to the downside for retesting 0.8818 low instead.

In the bigger picture, fall from 1.1046 (2022 high) is seen as a leg in the long term range pattern from 1.0342 (2016 high). So, downside should be contained by 0.8756 to bring reversal. Sustained break of 0.9058 support turned resistance will be the first sign of medium term bottoming. However, decisive break of 0.8756 will carry larger bearish implications.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:45 NZD Terms of Trade Index Q1 -1.50% -1.10% 1.80% 1.50%
23:50 JPY Monetary Base Y/Y May -1.10% -1.40% -1.70%
06:45 EUR France Industrial Output M/M Apr 0.80% 0.30% -1.10%
12:30 USD Nonfarm Payrolls May 339K 180K 253K 294K
12:30 USD Unemployment Rate May 3.70% 3.50% 3.40%
12:30 USD Average Hourly Earnings M/M May 0.30% 0.30% 0.50%

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