USD Back in Demand Following Better Data & Hawkish Fed Comments

The US Dollar swung back into action yesterday with a sizeable rally in response to a better-than-expected US ISM services PMI for September. The data came in at 56.7, above the expected 56 reading the market was looking for. The ADP employment change number was also seen coming in above expectations at 208k vs 200k expected raising hopes of a positive result at tomorrow’s headline NFP event. Along with the better-than-expected data, Fed’s Daly and Bostic were seen voicing their support for continued and sustained tightening, both warning against removing monetary tightening to quickly, essentially pouring cold water on the idea of a Fed pivot in the near-term.

Key Factors for Today

- USD rallies on data beat and hawkish Fed comments
- Volatile swings in equities – most indices recover losses
- CHF leading in FX following hawkish SNB comments
- ECB minutes due today
- Metals bounce back following yesterday’s drop
- Oil rallies on OPEC+ supply-cut news

Coming Up

- EUR ECB Meeting minutes
- CAD Canadian Ivey PMI
- USD Fed’s Cook, Waller & Mester to speak

Equities Bounce Back Following Dollar-Driven Volatility

Yesterday was a volatile session for stocks with equities seen reversing lower initially as the US Dollar kicked back into gear. However, by the end of the day, most indices had recouped losses and were trading back in the green. Looking across the European open today we can see a tentative start with the DAX and the FTSE both under a little selling pressure while the Nikkei and the ASX are both faring a little better, US stocks too. Little in the way of key data today but keep an eye on a raft of Fed speakers which are likely to cause some USD/equities volatility ahead of tomorrow’s jobs report.

Wetherspoons Shares Under Pressure

Shares in iconic UK pub-chain JD Wetherspoons are sitting near lows ahead of tomorrow’s earnings report. The company has struggled massively on the back of COVID and rising energy prices have proved too much to handle with the company announcing recently that it will close more than 30 UK sites before year-end. With shares down around 60% on the year, traders are bracing for another leg lower tomorrow in response to a weak set of earnings.

SNB Rallies on Hawkish Comments

In FX, the Swiss Franc is leading the way on Thursday. The currency has been rather muted recently but, on the back of hawkish SNB comments yesterday, has spring back to life today. SNB’s Maechler said that further rate hikes were very likely and noted that the bank stands ready to intervene on either side of the market depending on extreme CHF price movements.

Traders Looking to ECB Minutes & Fed Speakers

Elsewhere, the resurgent strength in USD yesterday has put pressure on G10 FX, fuelling a quiet start to Thursday’s trading. Looking across today’s session, traders will be closely watching the latest ECB meeting minutes given the newly hawkish expectations built into the outlook, as well as monitoring the latest round of Fed speak ahead of tomorrow’s NFP event.

Volatile Moves in Metals

In the metals and commodities space, we saw plenty of volatility yesterday as both gold and silver plunged in response to the Dollar res-strengthening. However, both metals have found a fresh bid today and are trading back at or near recent highs.

OPEC+ Cuts Supply by 2million Barrels Per Day

Oil prices have moved back into the spotlight this week in response to the OPEC+ meeting yesterday which saw the group announcing a fresh 2million barrel supply cut. The move has drawn open criticism from the US given president Biden’s agenda aimed at driving down energy prices. Crude futures rallied in response to the news and are now up around 16% off recent lows.