Friday's US Employment Report keeps USD under pressure, especially vs. EUR and CHF. Little resistance until 1.6020 all-time high in EURUSD.

Risk aversion trade is a mixed bag as JPY weakens again to start the week. SNB's Roth to speak.

MAJOR HEADLINES – PREVIOUS SESSION

• New Zealand QV House Prices rose 2.4% YoY vs. 4.9% expected.
• Hillary Clinton accepts defeat and throws support behind Barack Obama as Democratic nominee for President.

THEMES TO WATCH – UPCOMING SESSION
Key Risk Events (All times in GMT)

• Switzerland May Unemployment Rate (0545)
• Germany Apr. Trade Balance (0600)
• Japan May Eco Watchers Survey (0700)
• UK May PPI Input/Output (0830)
• Canada May Housing Starts (1215)
• Switzerland SNB's Roth to Speak (1400)
• US Apr. Pending Home Sales (1400)
• Australia Q3 Manpower Survey (1401)
• US Fed's Geithner to speak (1615)
• EuroZone ECB's Trichet to speak (1630)
• UK May BRC Retail Sales Monitor (2301)
• UK May RICS House Price Balance (2301)
• Japan Apr. Machine Order (2350)
• US Fed's Bernanke to speak on Inflation (0015)
• Australia Apr. Home Loans and Investment Lending (0130)
• Australia May NAB Business Confidence (0130)

Market Comments

Friday saw a massive continuation of the EURUSD move higher with the US employment rate jumping an enormous 0.5% to bring the rate to 5.5% vs. expectations that it would only nudge 0.1% higher to 5.1%. The nonfarm payrolls number was negative, but marginally better than expected, so obviously the rate was in focus as it posted the largest change from month to month in 22 years. The sharp analysts poring through the BLS statistics noted that a large chunk of the increase was due to an increase in seasonal (summer) unemployed workers showing up in the survey this month rather than next month due to some curiosities in the calendar, but the trend is nonetheless clear, even if it means that next month's data may show a bit of a dip.

Due to Trichet's very hawkish performance on the previous day, the USD weakened very sharply vs. the EUR as the weak employment situation encourages the idea that the Fed will be unable to hike rates in such a weak growth environment while the ECB is prepping the market for a hike as soon as next month. The ECB's Bini Smaghi and Weber added to the hawkish rhetoric from the ECB with further saber-rattling on inflation on Friday. With the EuroZone yield curve now beginning to invert, it appears that the ECB is setting up the EuroZone economy for a hard landing with its insistence on raising rates into a weakening economy. It's not hard to find criticism for their hawkishness from both economists, who point out that inflation is a lagging indicator and is still relatively low compared to historic levels, and from politicians within the EuroZone. It will be particularly interesting to see the continuing reaction to the ECB's hawkishness from those parts of Europe that are not at all ready or willing participants in a tightening of credit from the central bank as their economies have tipped over and are teetering on recession. Spain's PM has already lashed out, saying "I would advise Mr. Trichet to be more careful in his comments."

So, while the ECB's renewed stance may push EuroZone short rates higher in the medium term and further widen the interest rate differentials between the EuroZone and the US, the run in EURUSD higher is likely to be a relatively brief one that will eventually reverse when the Germany economy finally shows firmer signs of wilting and the risks of an overly strong currency and a hawkish central bank run amok become evident. If EURUSD is able to surpass the 1.5820 resistance, then there is little to stop it ahead of the 1.6020 high and we could even see new highs above that level in the coming few weeks before the pair meets sustained resistance. 1.5700 is the first big support level.

Watch out for the SNB's Roth today, as the SNB may display an inflation-fighting earnestness in line with the ECB. The SNB is always concerned with maintaining the value of the franc and Swiss inflation figures have also registered multi-year highs of late. SNB Governing board member Jordan was out Friday discussing "uncomfortable" inflation and the risk of second-round effects on Friday.

Elsewhere, the JPY was surprisingly weak overnight considering the massive wave of risk aversion on Friday triggered by oil rising an astounding 11 dollars a barrel into the close and closing at an all time high (Friday was a good example of the reflexive nature of the oil/USD relationship). Bonds rallied sharply on this development and stocks headed steeply south. An oil price rise from these levels is the world's most dangerous growth tax. The risk aversion did help to keep the GBP and especially CAD, AUD and NZD on the weak side.

This week's big focus for US data will be tomorrow's Trade Balance number, but especially Thursday's Retail Sales report and the Friday CPI release.