Market developments following the release of the US (un)employment report have been very interesting. Even though as is frequently the case, the payroll numbers could be interpreted in a positive (below expectations drop in payrolls) and a negative way (fantasyland adjustments on the back of the birth-death model, lower average weekly hours), the markets chose to move significantly against recent trends. Especially the sell-off in EUR-USD and Gold seems noteworthy. The rising risk appetite (as well as rising inflation worries) have propelled Gold and EUR-USD higher over the past months in line with rising equity markets. While technicals for all three assets have been highlighting overbought conditions, short USD (vs EUR) and long Gold seem to have been the much more crowded trades than long equities. In turn, the break of the upward trendlines might well signal the start of a much broader correction across risky assets and be followed by a breakdown in the positive momentum in equity markets as well. Risk appetite might well take a setback again in the days and potentially weeks ahead.
Bond yields have continued their march higher. However, I maintain the view that the yield highs are close and we should top out in the days ahead.