Risk appetite absent, as dollar resilient after ADP Non-Farm jobs result
Risk sentiment remains somewhat suppressed today, while the 10-year yield of 1.53% and inflationary pressures have kept the advance in the reserve currency buoyant.
Yesterday’s ISM services PMI employment component of 53.0, above the 50.0 barrier, may have assisted today’s upbeat jobs data of 568K, which beat the forecast of 425K. Stubborn inflation and a strong NFP number could provide fuel for the Fed to go ahead with announcing its tapering plans around the November meeting, but nothing is certain. The dollar index is currently lingering around the 94.30 barrier.
Despite recent strength in the reserve currency, the Swiss franc and the Japanese yen are faring slightly better against the greenback with the USD/CHF and USD/JPY pair’s dipping to 0.9285 and 111.33 respectively.
Eurozone and UK under Energy squeeze
Worries are growing that European soaring energy prices and supply shortages could curb the pace of the recovery as gas prices rise by 40%. However, it is unlikely the ECB will change its dovish stance and will retain a cautious and accommodative tone. On the back of this, disappointing August factory orders in Germany of -7.7%, which came in much lower, than awaited weaker expectations of -2.3%, along with a miss in Eurozone retail sales of 0.3% for an August forecast of 0.7% has weighed further on the euro. This is signaling hampered consumer spending in the respective month. The euro is currently around $1.1545 failing to produce any lift after stronger ADP private sector jobs data.
As the northern part of the world moves into the winter season, rising energy costs are due to cause further strain on economies and households. The rise is adding to the inflation fire and could start to hurt industrial production, and down the road, jobs as well. Growing natural gas demand is causing huge pressure on oil stockpiles.
The UK is dealing with fuel supply shortages as well as truckers, and persistent rising energy prices can’t be good as the weather gets colder. A possible rate hike at this point won’t help people’s disposable income, but Prime Minister Boris Johnson will raise the minimum wage to help somewhat counter the rise in energy prices. The pound rebounded somewhat to $1.3572, despite a firm dollar.
Oil, gold and commodity currencies start to bounce back
WTI oil futures latest price retraction has stabilized around the $78.00 per barrel mark. An expected rise in stockpiles by 1mln barrels is estimated and the surging prices in natural gas and coal are adding to the energy crisis and raising the demand for crude and oil manufactured goods.
The RBNZ interest rate event (25bps hike to 0.50%) appears may have already been discounted in the NZD/USD pair and the lack of a more hawkish tone from the RBNZ may have been deciphered by markets as weakness, which resulted in today’s decline in the pair from early hours of Wednesday.
Nonetheless, the antipodean currencies are making a comeback following today’s drop. The aussie and the kiwi have found traction around the 0.7226 and 0.6876 respective levels and have gained positive momentum.
Gold also picked up and steered to $1,760 after finding some footing around the $1,747 level.
Scheduled at 14:30 GMT are US crude oil inventories, while later at 15:30 GMT, FOMC Member Bostic is due to speak.
