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Welcome to the first week of the rest of your life.

By now you all know what’s coming and if you don’t, well, you can review the HR weekend reading or you can simply scan the short version here.

Overnight, the action found the dollar adrift (although it did bounce a bit later in the session) and the euro looking for reasons to move higher. “The dollar traded lower versus most of its Group-of-10 peers on position unwinding after the latest U.S. employment report, while the euro attempted to maintain bullish momentum fueled by a more hawkish-than-expected European Central Bank,” Bloomberg wrote, earlier this morning, adding that “the early drop picked up its tone from last week’s close as investors assessed that market pricing reflected three hikes by the Federal Reserve this year and left dollar-bulls looking for signs from this week’s meeting that four hikes may be a serious option for policy makers.”

Right. So in just five weeks, we’ve round-tripped from “there’s no way the Fed can hike with weak average hourly earnings” to “ok, three hikes is a foregone conclusion now do I hear four?”

Dollar

“Markets are already fully priced for a Fed rate hike on Wednesday,” Janu Chan, a senior economist at St. George Bank in Sydney said. “Non-farm payrolls confirmed that. If the Fed were to provide a stronger signal it would hike three times this year, it would be dollar- supportive, at least in the near term.” 

“After the FOMC, there is U.S. budget outline and G-20 meeting”, Kyosuke Suzuki, head of FX and money-market sales at Societe Generale in Tokyo adds. 

I would note that the Netherlands move to block entry to Turkish ministers could give Geert Wilders’ PVV a boost in the Dutch elections. “The cabinet has shown political decisiveness,” said Kees Aarts, professor of political institutions and behavior at the University of Groningen told Bloomberg. “But when you add everything up, what happened will clearly help Wilders.”

I have to tell you, I’m a little curious as to what fate would befall the euro should the Fed come out guns blazing at the same time Wilders’ party puts up a better-than-expected showing. That would appear to present the possibility of a double whammy hitting the single currency at a time when it’s been supported. There’s a similar setup in sovereign spreads and € IG credit. Nothing is priced for a bloodbath on Wednesday across the pond. Hopefully I’ll be wrong, but just remember I said it.  Here’s a bit more useful color on the central bank and geopolitical front from SocGen:

The Fed isn’t the only central bank meeting this week, We get the Bank of England, the NorgesBank, the SNB and the BOJ as well, among (several) others. In the UK, we also get the House of Commons vote today or the Brexit Bill. That could antagonise the Prime Minister but won’t stop Article 50 being triggered. We get unemployment data on Wednesday, expected to show a slight dip in wage growth to 2.5% that won’t discourage the view that the inflation uptick is all about oil prices and the weaker pound and will hurt real incomes rather than trigger any kind of wage/price spiral. As for the SNB and BOJ we look for no change.

As for equities, the largely positive NFP print has traders in a positive – if tentative – mood. Asian stocks were up pretty much across the board with South Korean shares brushing off political turmoil and Hong Kong shares moving up by more than 1%. In Europe, we’re mostly green but again, traders are kind of frozen in time right now.

  • Topix up 0.2% to 1,577.40
  • Hang Seng Index up 1.1% to 23,829.67
  • Shanghai Composite up 0.8% to 3,237.02
  • Sensex up 0.06% to 28,946.23
  • Australia S&P/ASX 200 down 0.3% to 5,757.35
  • Kospi up 1% to 2,117.59
  • FTSE 7356.05 12.97 0.18%
  • DAX 11975.31 12.13 0.10%
  • CAC 4997.83 4.51 0.09%
  • IBEX 35 9976.40 -30.00 -0.30

Oil continued to move lower on generally sh*tty sentiment. There’s probably a bit of a hangover from last week and if you want to point to fresh-ish bad news you can always blame the Baker Hughes number.

US futs are flat. Happy trading.

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