Spreadex Market Update
USD Holding Near Highs As Fed’s Williams Echoes Powell – ADP Data Next
As we saw last week, ahead of Powell’s Jackson hole Speech, the US Dollar looks to be settling into range-like conditions ahead of the headline jobs data coming on Friday.
Despite the lack of action, there were some key developments yesterday. CB Consumer confidence was seen coming in well above expectations at 103.2 vs 97.6 expected and 95.3 prior. Along with this data we saw the latest JOLTS jobs openings number jump to 11.24 million from 11.04 million, despite expectations of the number falling back under 10 million.
We also heard further hawkish Federal Reserve commentary yesterday. The Fed’s Williams echoed Powell’s Jackson Hole comments, citing his view that interest rates will likely remain at higher levels for longer, given the inflation outlook. William’s also pushed back against the market view of a Fed rate cut next year
Key Factors for Today
- USD sitting off highs despite better consumer confidence data and hawkish Fed comments
- ADP employment data due today
- Risk sentiment stabilises again today (for now) following losses yesterday
- Aussie keeps the lead in FX, EUR weaker ahead of inflation data
- Crude prices turn sharply lower on demand fears
Coming Up
- EUR Eurozone Flash CPI estimate
- USD US ADP employment number
- USD Fed’s Mester speaks
Equities Volatility Continues
We’ve seen choppy action in equities markets so far this week. Yesterday, US stocks were seen tanking once more on initial USD strength as better data lifted sentient for the Dollar.
With USD since retreating once again, we’ve seen the S&P stabilising today, seeing better demand across the European open. It’s been a broadly similar story across the equities space with most indexes seeing prices back in the green today following losses yesterday. Today’s US ADP employment number, as well as comments from The Fed’s mester, are likely to be the main catalysts for traders to monitor.
AUD Stays Strong
In FX, the softness in USD once again today is allowing AUD to continue higher. The currency has been the strongest beneficiary of the recent loss of upside momentum in USD. While risk flows have been choppy, the Aussie seems to be benefiting from hawkish RBA expectations also, given the bank’s recent firm signals of more rate hikes to come.
EUR Weak Ahead of CPI Data
EUR has been weaker today, ahead of the upcoming flash CPI estimate. The market is expecting a further increase in consumer prices this month, putting greater pressure on the ECB ahead of the upcoming September rates meeting. Despite hawkish ECB expectations, concerns over the growth outlook in the Eurozone are acting as a drag on the currency.
Oil Turns Sharply Lower on Demand Fears
In the metals and commodities space, gold and silver have been unable to capitalise on the current USD lull with both metals under pressure again today. Crude oil prices turned sharply lower yesterday.
Following a decent start to the week, crude prices fell heavily as concerns over the global demand outlook and new talk of an Iran Nuclear deal took their toll. Rising inflation and rising central bank rates are adding to recessionary fears, acting as a headwind for oil bulls.
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