From today onward, a series of US employment-related indicators will be released, and the market is showing a strong inclination towards adjustment. Currently, the market is experiencing a decline in stocks and a strengthening of the yen, reflecting a risk-averse sentiment. The USD/JPY pair has fallen below the 144 yen level, reaching a low of around 143.68 in response to the significant drop in the Nikkei average. It has depreciated by approximately 1 yen from the recent high. Concerns over political tensions between the US and China, China’s economic slowdown, and a downturn in European economic indicators have raised worries about a global economic slowdown. However, these developments seem to have been anticipated. In actuality, it appears that there is an increasing adjustment sentiment ahead of the series of US employment-related indicators to be released today and tomorrow.
If the employment data comes in too strong, it may reinforce expectations of continued US interest rate hikes and exert downward pressure on stock markets. On the other hand, if the labor market shows signs of cooling down, it could revive the stock market. In this case, it will be interesting to see if the risk-off sentiment this week turns out to be genuine.
It is worth noting that there is growing criticism in Europe and elsewhere regarding price increases by companies. According to an ECB economic report, the analysis indicates that profit-seeking by companies is more prevalent than wage increases, which are one of the two major factors driving core inflation. Recently, French Finance Minister Le Maire pointed out that several major food companies did not follow through on their promise to reduce prices starting in July. Furthermore, today’s news reports suggest that the Bank of England’s Bailey has criticized certain retailers for overcharging customers, highlighting concerns about corporate price hikes. While it remains uncertain to what extent companies will take action based on their verbal commitments, it is evident that core inflation is persisting.
Market sentiment is currently in a highly transitional state due to conflicting views on the persistent expectations of interest rate hikes for taming inflation and concerns that the accumulated rate hikes may cool down the economy. In such a situation, differences in the conditions of each country are likely to contribute to the strength and weakness of individual currencies, making cross-currency transactions more active. It will be important to pay attention to these points going forward.
The economic indicators to be announced in the foreign markets later include Eurozone Retail Sales (May), US MBA Mortgage Applications (06/24 – 06/30), US Challenger Job Cuts (June), US ADP Employment Change (June), US Initial Jobless Claims (06/25 – 07/01), US Trade Balance (May), Canada International Merchandise Trade (May), US Non-Manufacturing PMI (Final, June), US ISM Non-Manufacturing Index (June), and US JOLTS Job Openings (May), among others. As a prelude to tomorrow’s release of the US employment statistics, there will be a significant number of employment-related indicators announced today.
Anticipating increased volatility in the market due to adjustment movements, it is important to pay attention to the potential impact of the upcoming releases, particularly the US ISM Non-Manufacturing Index and JOLTS Job Openings.
