Very interesting price action on Friday following on from the US job numbers. So markets initially reacted to the higher-than-expected nonfarm payroll print of 336,000 versus the 170,000 driving US treasury yields higher, equities lower and of course USD stronger. However, with the unemployment rate remaining at 3.8% and average hourly earnings dropping to 4.2%, these moves were swiftly reversed with USD actually finishing lower on the day. It seems, for now at least, the markets have priced in the idea of higher rates for longer over in the US and we will likely continue to see the currency weaken. GBP and EUR both over performed on the day.
* Daily move - against G10 rates at 7:30am, 09.10.23
** Indicative rates - interbank rates at 7:30am, 09.10.23
Risk aversion sets the tone for the start of the week after the surprise attack by Hamas on Israel over the weekend. Equity futures are all pointing to a lower start, oil is higher on supply concerns and in the FX space, USD is gaining. The key events for this week will be the IMF’s global growth outlook, the FOMC minutes, US inflation numbers and UK GDP for August. Today we will have the Sentix investor confidence from Europe and several speakers from the ECB and the Fed. In light of tensions in the Middle East, risk aversion will likely be the driver in.
USD has opened the week higher on safe-haven flows on fears over a wider conflict in the Middle East. Oil also jumped higher on fears of a supply shock. The market reaction going forward will depend on risks of further destabilisation within the region.
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