> CN September Caixin Services PMI : 53.4 v. 49.3 exp.
> CA September Employment Change & Unemployment Rate : 157.1K & 6.9% v. 59.5K & 6.9% exp.
> US September Average Hourly Earnings : 0.6% v. 0.4% exp.
> US September Non-Farm Employment Change & Unemployment Rate : 194K & 4.8% v. 490K & 5.1% exp.
Weekend Headlines (BBG)
> US Congress passed an agreement to raise the debt ceiling until the beginning of December, setting up yet another fight between the two sides as the debt continues to rise in the US
> NZ reported 60 new cases of COVID19, igniting some selling of the NZD as investors re-calibrate the aggressiveness of the RBNZ’s normalisation path and risk aversion hits the currency in early trading
> Goldman Sachs has cut their growth forecast for the US economy, citing a slower than expected recovery in consumer spending and supply chain issues
What you need to know
As China returned from their Golden Week holiday Friday, markets braced for the potential headwinds to come as energy shortages and the Evergrande story grips Asian markets. Caixin services PMI numbers came in better than market estimates, however it did little to impact FX with the AUD trading in a tight range ahead of the US employment report and sliding marginally into the Tokyo fixing. All eyes were on employment figures from North America, as both the Canadians and Americans released their September job figures. The Loonie was buoyed by a strong rebound in CA employment, with the economy erasing nearly all the job losses seen during the pandemic thus far and pushing CAD 0.5% higher against the Dollar leading into the NFP release.
The US employment report was interesting, with the headline number missing the mark by a wide margin and seeing sub 200K jobs added in the month. The key takeaway was the persistent move higher in wages, up 0.6% in the month while the unemployment rate dropped below 5.0%. Although the headline number missed, the inflationary pressures are mounting and will likely see the Fed start with their policy tightening as early as November. Key measures of inflation in bond markets are flashing red, with yields and breakevens continuing their move higher with the UST10y yield sitting over 1.61% on the open today.
The Dollar is down marginally, seeing some of its haven appeal lost as the US debt ceiling fight was kicked down the road for another two months. US equity markets finished the day in the red, down 0.25% as the tightening narrative was boosted on the employment report. Commodity markets have rebounded sharply following the recent selloff, with supply chain bottlenecks causing significant supply shortages and pushing up prices from oil to corn the worries are mounting. Gold remained resilient despite the strong move higher in rates, up a meagre 0.10% while Iron Ore was the story as the price rebounded near 8% as China came back following their holiday. WTI crude looks to make a run at the US$80/barrel level this week as rising prices is putting the global recovery at risk.
The Day Ahead
> EU August Italian Industrial Production : -0.4% exp.
> US Bank Holiday – Columbus Day
> CA Bank Holiday – Thanksgiving
After over 100 days in lockdown, NSW opens their economy as vaccination rates continue to push higher and life looks poised to return to some semblance of normal. Business confidence is likely to rebound in a major way as the re-opening looks to be fast tracked under the new Premier.
VIC is still lagging behind slightly, with COVID cases hitting all-time levels in the state over the weekend as the Delta outbreak takes hold. The inflation story is likely to be the talk of markets this week, with consumer and producer figures on the docket in the US alongside the FOMC’s minutes the Fed’s tightening path will be in focus. AU investors will have their eyes on the September employment figures on Thursday, although unlikely to have a major impact on the AUD as the re-opening is likely to boost sentiment. The NZD is struggling in early trading, with NZ’s COVID zero strategy coming under heavy pressure as the country’s cases continue to rise.
Range Today : 0.7260 – 0.7320
After being relatively resilient despite some of the risk-off headlines last week, the pair has been able to open the week above the 0.7300 handle and only a touch below key resistance at 0.7311 (55DMA). Will need to see the NFP high of 0.7338 broken to bring the 100DMA at 0.7427 into the picture, however the sentiment change and the commodity price rebound sets the stage for a move higher. The weekly low of 0.7226 is the target on a selloff, although the momentum seems to be towards a drift higher.
“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.
Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.
Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.
This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.
Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.
Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.
FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.
This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.
Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.
The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.
© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.