Market wrap: nonfarm payrolls and dollar sold-off - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: The eagerly awaited US payrolls report was stronger than expected, cementing the case for a Fed rate hike this week. Markets had already priced in such an outcome, though, and the ensuing profit-taking caused US interest rates and the USD to decline.

Interest rates: US 10yr treasury yields fell from 2.62% to 2.57%, while 2yr yields fell from 1.38% and 1.35%. Market pricing for a March hike remained intact, though, April Fed fund futures at 0.88% implying a 100% chance of a rate hike in March.

Eurozone bond markets reacted to a Reuters story that the ECB discussed raising interest rates before ending QE. German 10yr yields jumped from 0.43% to 0.50% - equal to the 29 Jan one-year high.

Currencies: The US dollar index shed 0.6%. EUR was one of the best performers, helped by the ECB story, rising from 1.0600 to 1.0699 – a one-month high. GBP was one of the worst, ranging sideways between 1.2140 and 1.2188, after reports UK PM May could trigger Brexit as early as this Tuesday. USD/JPY fell from 115.45 to 114.65. AUD rose from 0.7510 to 0.7557. NZD rose from 0.6900 to 0.6946. AUD/NZD ranged sideways between 1.0860 and 1.0900.

CFTC’s speculative positioning report (as at Tue) showed USD index longs were increased slightly, AUD longs were reduced slightly, and NZD longs were flipped to net short. US 10yr treasury shorts were reduced from a record short state, while 3mth Eurodollar shorts were increased to a fresh record level."