Fed Hints at November Pause as Yields Rise

Yields declined for a second consecutive session on Thursday as increasing numbers of Fed officials acknowledged that the recent surge in the 10-year Treasury yields could eliminate the need for further interest rate hikes, thereby raising the likelihood of a potential pause in November.

Key Factors for Today

• Fed's Daly links bond market turmoil to a possible rate pause in November.
• EURUSD sees gains despite comments from ECB speakers.
• UK construction contracts, but the Pound strengthens.
• Saudi Arabia's WTI price hike raises concerns.
• Market movers highlight mixed performances across currencies and commodities.
• Economic calendar features key events for the day.
• A quote of the day provides financial wisdom.

Market Movers

• Fed's Daly links bond market turmoil to potential 25bps rate hike, increasing odds of a Fed pause.
• Oil prices down due to demand uncertainty and Saudi Arabia's November price hike.
• EURUSD rises despite ECB concerns about lending conditions and financial tightness.
• UK construction sector contracts sharply, but GBPUSD gains.

Economic Calendar

• German Factory Orders
• Halifax House Price Index
• French Trade Balance
• Nonfarm Payrolls
• Fed Waller Speech

The Big News

Bond Market Rout and Fed's Daly

Fed officials are acknowledging the impact of the recent surge in the 10-year Treasury yields, with Fed's Mary Daly suggesting that the bond market turmoil is equivalent to a 25 basis points rate hike. She believes this might eliminate the need for further interest rate increases this year. The focus now shifts to the all-important jobs report, as CME's FedWatch tool suggests an increasing possibility of a Fed pause in November.

WTI Price Hike from Saudi Arabia

Oil prices continue to face uncertainty due to a cloudy demand outlook and market concerns about restrictive policies. Investors are watching closely as Saudi Arabia's November price hike could potentially create a need for spot buying, leading to a contango situation. WTI crude has slipped over 2% to $82.50 per barrel, with support at $80 and resistance at $85.

EURUSD Up Despite ECB Comments

ECB's Philip Lane and Luis de Guindos have expressed concerns about tighter financial conditions affecting various sectors. Despite these sentiments, the Euro zone's borrowing costs fell, allowing EURUSD to rise by 0.43% on the back of a weaker US dollar. Traders are now eyeing the $1.0595 level, with support at $1.05.

UK Construction Contracts, but Pound Strengthens

The UK's construction sector saw a significant drop in the S&P Global/CIPS Construction PMI, slipping into contraction territory. House building declined, leading to lower expectations for future business activity. Despite this, the Pound strengthened by 0.50% against the US dollar, reaching $1.2193. Key levels to watch are $1.2272 and support at $1.21.