For a second day, the U.S. dollar benefits from a retreat in risk appetite.
Overview
Global equity markets are red across the board, although the losses are mostly modest. American futures show indexes will open about half a percent lower today. This morning’s economic data continued to show positive signs for the labor market. Weekly jobless claims registered at 219 last week, slightly higher than the week prior but historically low. Three different Fed members will speak throughout the day. But attention is likely to shift to tomorrow’s Non-farm payroll numbers.
Economists expect that the U.S. economy added 260K jobs in September. Perhaps counterintuitive, but a better-than-expected number could cause equities to fall as it would bolster the Fed’s resilience to continue aggressive rate hikes.
What to Watch Today…
- Three Fed Speakers today
7 wins in last 8 quarters! | #1 MXN Forecaster for Q3 2022
Bloomberg ranks Monex USA (formerly Tempus) as the top MXN Forecaster again! Learn More
EUR ⇓
The Euro is a touch softer against the U.S. dollar as European equities dipped and traders cut expectations for the European Central Bank, although modestly. The minutes from the most recent ECB meeting showed that some policymakers preferred a 50-basis point hike, instead of 75, due to recession risks. As a result, traders moved expectations for hikes by September from 223 bps to 217bps. Modest indeed, but it was enough to cause the Euro to weaken a touch.
GBP ⇓
The British pound was under renewed pressure overnight, falling 0.6% against the U.S. dollar. Fitch Ratings lowered the United Kingdom’s sovereign credit outlook. While the rating agency did affirm the U.K.’s AA-, the fourth highest level, it lowered the outlook to negative. Fitch fingered the government’s new growth plan and how it could increase the nation’s fiscal deficit as the culprit. S&P Global Ratings cut the U.K.’s outlook last week.Worries in the U.K. bond market are also hurting the sterling’s prospects. The Bank of England is set to exit the bond market next week on October 14th. The bond market has already been volatile, and with the BoE’s exit, there is no longer a “buyer of last resort.” Many analysts are calling the situation a possible “cliffs edge” and will all but certainly cause turbulence for the sterling.
