Friday October 8th, 2021

The US$ is flat, oil prices strengthen, equity markets are mixed while US yields remain firm ahead of today’s US Jobs data. Nonfarm Payrolls is forecast to increase to 488k vs August’s disappointing 235k. A disappointing NFP print today would likely put selling pressure on the US$. Fed Chair Powell clarified that a robust report is not needed for the Fed to start tapering its asset purchases, but a strong NFP today would boost expectations for Fed tapering. In other news, US Senate approves temporary lift of debt ceiling and averts default. Ireland’s corporate tax rate is set to rise to 15% as part of global deal. China calls for a huge boost in coal output to fight the current power crunch. The UK is seeing companies instigate pay rises by the most on record, as staff shortages impact UK businesses. Covid, Sydney Australia readies to exit lockdown, but doctors fret reopening is moving too fast. UK says it is not sure the exact date that the US will open travel to British travelers. In currency markets, currencies consolidate ahead of the US Nonfarm payroll numbers. CNY is flat while Asian currencies are divided. INR, TWD, THB & KRW fall 0.3%, while PHP, MYR, SGD & HKD are flat on average vs US$. Trading currencies mixed with AUD & ZAR up 0.2% on higher fuel prices, MXN is up 0.1%, NZD & NOK are flat while JPY is down 0.25% vs US$. 

Oil prices extend gains and is on track for a 5% rally this week as industries switch from high priced gas to lower priced oil and also on doubts that the US government will release oil from its strategic reserves. C$ extends gains to 1-month highs vs US$ as oil prices continue to strengthen and “risk-on” sentiment returns after the US government reaches a temporary deal to avoid a default on US government debt. Markets remain vulnerable for further volatility into both Canadian and US unemployment data releases this morning. Support resets to 1.2520, if breached look for 1.2470 next, while resistance lowers to 1.2610.

Euro remains under pressure ahead of US Nonfarm Payrolls release. The US is expected to report an increase of 488k jobs for September, a stronger than expected NFP number would cap Euro strengthening. The Senate’s vote to avert hitting the debt ceiling helped boost Euro in early trading, but markets remain focused on US NFP and ECB President Lagarde’s speech will provide intraday direction for Euro.  Support holds, while resistance rises to 1.1620.

EURGBP rebounds slightly in relatively thin markets ahead of ECB Lagarde’s speech and US NFP release. YTD Euro has weakened 5% vs GBP and is down 1.2% in October. Support holds at .8460 (1.1820) while resistance holds .8580 (1.1655).

GBP rebounds above 1.36 in choppy trading on Brexit woes and caution ahead of US NFP. Brexit continues to be front and centre for the Pound as a French MP threatens the UK retaliation over the ongoing fishing row and markets brace for the new NI protocol proposals. Intraday the key US NFP release will provide currency markets intraday direction. Support resets to 1.3580 and while resistance holds at 1.3630.