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Dollar rises in early US session after better than expected employment data. It's now attempting a breakout against Euro. Canadian Dollar is also firmer after job data. On the other hand, Sterling remains one of the weakest for the week, as post BoE selloff continues. But Euro and Swiss Franc are catching up.

Technically, EUR/USD's breach of 1.1523 support now suggests resumption of whole fall from 1.2265. We'll now see if it could sustain below 1.15 handle and build up downside momentum further. Meanwhile, we'd also pay attention to whether GBP/USD would follow by breaking through 1.3410 support, and whether USD/JPY would break through 114.69 high.

In Europe, at the time of writing, FTSE is up 0.42%. DAX is up 0.22%. CAC is up 0.89%. Germany 10-year yield is down -0.008 at -0.232. Earlier in Asia, Nikkei dropped -0.61%. Hong Kong HSI dropped -1.41%. China Shanghai SSE dropped -1.00%. Singapore Strait Times rose 0.70%. Japan 10-year JGB yield dropped -0.0182 to 0.064.

US NFP grew 531k in Oct, unemployment rate dropped to 4.6%

US non-farm payroll employment grew 531k in October, better than expectation of 425k. Prior month's figure was also revised sharply higher from 194k to 312k. Thus far this year, monthly job growth averaged 582k. Total non-farm employment was still -4.2m, or -2.8% from its pre-pandemic level in February 2020.

Unemployment rate dropped from 4.8% to 4.6%, below expectation of 4.7%. Labor force participation rate was unchanged at 61.6%. Average hourly earnings rose 0.4% mom, matched expectations.

Canada employment grew 31.2k in October, above expectation of 19.3k. Unemployment rate dropped to 6.7%, down from 6.9%, below expectation of 6.9%.

Eurozone retail sales dropped -0.3% mom in Sep, EU down -0.2% mom

Eurozone retail sales dropped -0.3% mom in September, versus expectation of 0.2% mom. Volume of retail trade decreased by -1.5% for non-food products, while it rose for food, drinks and tobacco by 0.7% and for automotive fuels by 1.1%.

EU retail sales dropped -0.2% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Germany (-2.5%), Finland (-1.9%) and the Netherlands (-1.2%). The highest increases were observed in Estonia (+7.1%), Slovakia (+2.9%) and Luxembourg (+2.3%).

Also released, Germany industrial production dropped -1.1% mom in September, below expectation of 1.1% mom rise. France industrial output dropped -1.3% mom in September, versus expectation of 0.4% mom rise. Italy retail sales rose 0.8% mom in September, versus expectation of 0.7% mom. Swiss Foreign currency reserves dropped to CHF 923B in October.

RBA SoMP: Inflation forecasts upgraded across horizon

As seen in RBA's Statement on Monetary Policy, 2021 year-average GDP growth forecasts was downgraded from 4.75% to 4.25%. 2022 GDP year-average GDP growth forecast was left unchanged at 5%. 2023 year-average growth forecast was upgraded from 2.75% to 3%.

Headline CPI inflation forecasts were raised across the horizon, with 2021 year-end increased from 2.5% to 3.25%, 2022 year-end increased from 1.75% to 2.25%, 2023 year-end increased from 2.25% to 2.5%. Trimmed mean inflation forecasts were also raised, with 2021 year-end increased from 1.75% to 2.25%, 2022 year-end from 1.75% to 2.25%, 2023 year-end from 2.25% to 2.5%.

2021 year-end unemployment rate forecast was lowered from 5% to 4.75%. 2022 year-end and 2023 year-end unemployment rate forecast was left unchanged at 4.25% and 4% respectively.

Australia AiG services rose to 47.6 in Oct, third month in contraction

Australia AiG Performance of Services rose 1.9 pts to 47.6 in October, marking a third month in contraction. Sales rose 13.8 to 55.2. Employment rose 4.8 to 56.8. New orders dropped -1.0 to 38.8. supplier deliveries dropped -7.5 to 39.5. Finished stocks dropped -13.7 to 39.8. Capacity utilization dropped -1.7 to 74.5. Input prices rose 9.1 to 73.6. Selling prices rose 7.8 to 61.7. Average wages rose 9.1 to 68.3.

Ai Group Chief Executive, Innes Willox, said: "The Australian services sector reported mixed fortunes in October... Across the services sector, sales and employment were higher in October while new orders were discouragingly low. A more robust recovery was inhibited by lingering activity restrictions, barriers to interstate movement and the same disruptions to the supply of inputs that are being felt in other parts of the economy... Services companies reported further strong rises in input prices and wages with selling prices also rising although not by enough to prevent additional pressure on margins."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1517; (P) 1.1567; (R1) 1.1605; More...

EUR/USD's break of 1.1523 suggests resumption of fall from 1.2265, and that from 1.2348 too. Intraday bias is back on the downside for 61.8% projection of 1.1908 to 1.1523 from 1.1691 at 1.1453. Break will pave the way to 100% projection at 1.1306. On the upside, though, above 1.1615 minor resistance will delay the bearish case and turn bias neutral first.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

Economic Indicators Update

US non-farm payroll employment grew 531k in October, better than expectation of 425k. Prior month's figure was also revised sharply higher from 194k to 312k. Thus far this year, monthly job growth averaged 582k. Total non-farm employment was still -4.2m, or -2.8% from its pre-pandemic level in February 2020.

Unemployment rate dropped from 4.8% to 4.6%, below expectation of 4.7%. Labor force participation rate was unchanged at 61.6%. Average hourly earnings rose 0.4% mom, matched expectations.

Full release here.

The British pound has extended its losses in the Friday session. GBP/USD is currently trading at 1.3445, down 0.41% on the day.

Pound tumbling post-BoE

It’s been a miserable week for the British pound, which is down 1.76% this week. The driver behind the pound’s slide was the BoE meeting, as policy makers caught the markets off guard when they opted to maintain the cash rate at 0.10%. Governor Andrew Bailey had strongly hinted that that bank would raise rates at this week’s meeting, but in the end, the MPC voted 7-2 to stay put, with Bailey among the majority. Bailey noted that the decision had been a “close call”, but the markets reacted sharply, with the pound plunging 2.2% since the BoE’s surprise non-move.

The BoE has said it will raise rates in the “coming months”, but is clearly under pressure to make a move soon, and it could be faced with a credibility issue if it chooses to sit on the sidelines at the December meeting. The fact that the BoE is still running a QE scheme while talking about raising rates is also a potential source of confusion for the markets, as the two programmes are inconsistent with each other. In contradistinction, the Fed has no plans to raise rates before it winds up its bond purchase program.

Attention now shifts to the US, with the release of nonfarm payrolls later today. The consensus stands at around 450 thousand jobs added, and a reading above the 500 thousand level will reignite talk of an accelerated taper programme and possibly the Fed bringing forward guidance on a rate hike. That would likely give the US dollar a boost. Conversely, a print below 350 thousand will dampen rate expectations and likely weigh on the greenback.

GBP/USD Technical Analysis

• GBP/USD continues to break support levels as it falls lower. The pair is testing support at 1.3471. Below, there is monthly support at 1.3253
• There is resistance at 1.3570 and 1.3632

Notes/Observations

• Germany Sept Industrial Production data misses consensus as supply-chain strains heighten.
• Markets continue to digest recent BOE rate decision after warnings in previous weeks that the central bank would have to act to curb inflation.
• ECB members continue to dial-back market rate hike expectations.
• Focus on US non-farm payroll report for clues on potential Fed lift-off.

Asia

• RBA Statement on Monetary Policy (SOMP): Committed to keeping highly supportive monetary conditions; Forecasts for cash rate broadly in line with recent market pricing. Raised Dec 2021 core inflation forecast from 1.75% to 2.25%and raised its Jun 2022 Core inflation forecast from 1.5% to 2.25%. RBA cut its Dec 2021 GDP growth forecast from 4.0% to 3.0% and cut the Jun 2022 GDP growth outlook from 4.5% to 4.0%.
• China State Planner (NDRC): Coal Inventory at power plants are at a normal level again.
• China Ministry of Finance (MOF) issued mandate related to planned issuance of EUR denominated bonds (as previously announced). To sell €4.0B in 3-year, 7-year and 12-year bonds in Hong Kong on Nov 10th.

Europe

• BOE Gov Bailey stated that was not the job of the central bank to steer markets on rates, Not surprised to see correction in markets as market rate pricing was puzzling, pricing for rate hikes was overdone.
• ECB’s Schnabel (Germany) reiterated Council view that conditions for a rate hike were unlikely to be met in 2022. Reiterated belief that see good reason that inflation will visibly decline next year.

Americas

• House to vote on President Biden’s $1.75T economic spending packages on Fri, Nov 5th.
• Sen Maj Leader Schumer (D-NY) stated that the goal was now to pass the Biden economic agenda by Thanksgiving (Nov 25th).
• House Democrats proposed increasing SALT (State and Local Tax) deduction cap to $80K (up from $10K).

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.20% at 484.18, FTSE +0.49% at 7,315.24, DAX -0.01% at 16,028.15 , CAC-40 +0.35% at 7,011.99, IBEX-35 0.00% at 9,039.50, FTSE MIB +0.36% at 27,621.00, SMI +0.50% at 12,465.40, S&P 500 Futures +0.08%].
• Market Focal Points/Key Themes: European indices open modestly lower across the board but later moved to trade moderately higher; better performing sectors include consumer discretionary and technology; while sectors trending to the downisde indlue energy and utilites; Sweden closed for holiday; Allegro to buy Mall Group; Solidum sells its stake in Sampo; Caixabank divests stake in Erste; focus on release of NFP later in the session; earnings expected during the upcoming US session include Groupon, Fluor, Sempra and Gannett.

Equities

• Consumer discretionary: International Consolidated Airlines [IAG.UK] -1.5% (earnings), Casino Guichard-Perrachon [CO.FR] -1.5% (earnings).
• Industrials: Krones [KRN.DE] +6% (earnings), Airbus [AIR.FR] -1% (monthly deliveries), Leonardo-Finmeccanica [LDO.IT] -2% (earnings).
• Materials: Rheinmetall [RHM.DE] +2% (earnings).

Speakers

• BOE Gov Bailey reiterated view that interest rates would need to rise at some point but was not going back to period of having 4.0-5.0% rates.
• ECB's De Guindos (Spain) reiterated ECB council stance that factors behind recent surge in inflation were transitory. Reiterates Council view that inflation in EU to decline in 2022 but as much as expected due to second-round effects. ECB was very attentive to 2nd round effects. Factors behind inflation's surge was also having an impact on economic activity.
• ECB's Makhlouf (Ireland) stated that was comfortable with ECB's stance at this time. Needed to be vigilant on inflation and was prepared to take earlier action if necessary.
• ECB's Stournaras (Greece) reiterated ECB view that inflation rise was temporary.
• Poland Central Bank (NBP) Gov Glapinski stated that everything indicated no need for more rate hikes.
• Poland MPC Member Ancyparowicz stated that to hike more with inflation above forecast. NBP might need to continue with its tightening and must hike rates if CPI worsened.
• Poland Central Bank Gatnar stated that NBP should stay on course to normalize policy and that the next few rate hikes should curb inflation. CPI could hit 9.0% in 2022.

Currencies/Fixed Income

• Recent push back on inflation concerns and market pricing of potential interest rates hikes by various EU central bankers had triggered a sort of re-pricing back in the favor of the USD.
• EUR/USD hovered around the 1.1550 area as more ECB members talked down any possibility of a rate hike in 2022.
• GBP/USD was approaching the 1.3450 area for 1-month lows in the aftermath of the BOE rate decision to keep policy steady on Thursday. UK yields slump by most since Brexit vote after BoE dashes rate hike bets. Money markets were no longer pricing in the Bank Rate hitting 1.00% over the next year.

Economic data

• (SE) Sweden Sept Maklarstatistik Housing Prices Y/Y: 15% v 14% prior; Apartment Prices Y/Y: 7% v 8% prior.
• (DE) Germany Sept Industrial Production M/M: +1.0%e; Y/Y: -1.0% v +1.3%e.
• (UK) Oct Halifax House Price Index M/M: 0.9% v 1.7% prior; Y/Y: 8.1% v 7.4% prior.
• (DK) Denmark Sept Industrial Production M/M: -5.6 v +3.3% prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 37.5K v 49.3K tons prior.
• (TH) Thailand end Oct Foreign Reserves: $246.1B v $245.3B prior.
• (FR) France Sept Industrial Production M/M: -1.3% v 0.0%e; Y/Y: 0.8% v 2.5%e.
• (FR) France Sept Manufacturing Production M/M: -1.4% v +0.5%e; Y/Y: 0.1% v 3.5%e.
• (FR) France Q3 Preliminary Wages Q/Q: 0.3% v 0.5%e; Private Sector Payrolls Q/Q: 0.5% v 0.6%e.
• (ES) Spain Sept Industrial Production M/M: 0.3% v 0.1%e; Y/Y: 1.2% v 1.5%e; Industrial Output NSA (unadj) Y/Y: 1.9% v 3.6% prior.
• (CH) Swiss Oct Foreign Currency Reserves (CHF): 923.0B v 939.2B prior.
• (AT) Austria Oct Wholesale Price Index M/M: 2.6% v 0.8% prior; Y/Y: 15.8% v 13.5% prior.
• (CZ) Czech Sept Retail Sales Y/Y: 0.6% v 2.0%e; Retail Sales (ex-auto) Y/Y: 3.6% v 4.3%e.
• (HU) Hungary Sept Retail Sales Y/Y: 5.8% v 3.3%e.
• (HU) Hungary Sept Industrial Production M/M: -0.3% v -2.9% prior; Y/Y: -1.7% v -0.2%e.
• (TW) Taiwan Oct CPI Y/Y: 2.6% v 2.6%e; CPI Core Y/Y: 1.4% v 1.5%e; WPI Y/Y: 14.8% v 12.0% prior.
• (TH) Thailand Oct CPI M/M: 0.7% v 0.4%e; Y/Y: 2.4% v 1.9%e; CPI Core Y/Y: 0.2% v 0.3%e.
• (TW) Taiwan Oct Foreign Reserves: $546.7B v $544.9B prior.
• (DE) Germany Oct Construction PMI: 47.7 v 47.1 prior.
• (SE) Sweden Oct Budget Balance (SEK): 3.3B v 11.5B prior.
• (IT) Italy Sept Retail Sales M/M: 0.8% v 0.2%e; Y/Y: 5.3% v 2.2% prior.

Fixed income Issuance

• None seen.

Looking Ahead

• EU’s Sefcovic and UK Brexit Min Frost to meet in Brussels on Northern Ireland Protocol.
• (MX) Citibanamex Survey of Economists.
• 06:00 (EU) Euro Zone Sept Retail Sales M/M: 0.2%e v 0.3% prior; Y/Y: 1.5%e v 0.0% prior.
• 06:00 (EU) Daily Euribor Fixing.
• 06:00 (FR) France Debt Agency (AFT) announcements on upcoming issuance.
• 06:25 (EU) Daily ECB Liquidity Stats.
• 06:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2046 and 2050 Bonds.
• 07:00 (IE) Ireland Oct Live Register Monthly Change: No est v -5.3K prior; Live Register Level: No est v 165.0K prior.
• 07:00 (IT) ECB’s Panetti (Italy).
• 07:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).
• 07:00 (IN) India announces upcoming bill issuance (held on Wed).
• 07:30 (IN) India Weekly Forex Reserve w/e Oct 29th: No est v $640.1B prior.
• 07:45 (US) Daily Libor Fixing.
• 08:00 (CL) Chile Sept Nominal Wage M/M: No est v 0.1% prior; Y/Y: No est v 6.4% prior.
• 08:00 (MX) Mexico Oct Consumer Confidence: 44.1e v 43.4 prior.
• 08:00 (PT) ECB’s Centeno (Portugal) with Portugal Fin Min Leao.
• 08:30 (US) Oct Change in Nonfarm Payrolls: +450Ke v +194K prior; Change in Private Payrolls: +415Ke v +317K prior; Change in Manufacturing Payrolls: +30Ke v +26K prior.
• 08:30 (US) Oct Unemployment Rate: 4.7%e v 4.8% prior; Underemployment Rate: No est v 8.5% prior; Labor Force Participation: 61.8%e v 61.6% prior.
• 08:30 (US) Oct Average Hourly Earnings M/M: 0.4%e v 0.6% prior; Y/Y: 4.9%e v 4.6% prior; Average Weekly Hours: 34.8e v 34.8 prior.
• 08:30 (CA) Canada Oct Net Change in Employment: +41.6Ke v +157.1K prior; Unemployment Rate: 6.8%e v 6.9% prior; Full Time Employment Change: No est v +193.6K prior; Part Time Employment Change : No est v -36.5K prior; Participation Rate: 65.4%e v 65.5% prior ; Hourly Wage Rate Y/Y: 2.1%e v 1.7% prior.
• 08:30 (IS) Iceland to sell 2024 and 2028 RIKB Bonds.
• 09:00 (PL) Poland Oct Official Reserves: No est v $167.0B prior.
• 09:00 (PL) Poland Central Bank Nov Minutes.
• 09:00 (UK) Daily Baltic Dry Bulk Index.
• 10:00 (CA) Canada Oct Ivey Purchasing Managers Index (seasonally adj): No est v 70.4 prior; PMI (unadj): No est v 64.5 prior.
• 10:30 (TR) Turkey Oct Cash Budget Balance (TRY): No est v -32.9B prior.
• 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Denmark).
• 13:00 (US) Weekly Baker Hughes Rig Count.
• 15:00 (US) Sept Consumer Credit: $16.0Be v $14.4B prior.
• 20:00 (CO) Colombia Oct CPI M/M: 0.2%e v 0.4% prior; Y/Y: 4.8%e v 4.5% prior.
• 20:00 (CO) Colombia Oct CPI Core M/M: No est v 0.3% prior; Y/Y: No est v 3.0% prior.

Weekend data

• (CN) China Oct Foreign Reserves: $3.202Te v $3.201T prior.
• (CN) China Oct Trade Balance (CNY-denominated): 387.0Be v 433.2B prior; Exports Y/Y: 14.9%e v 19.9% prior; Imports Y/Y: 20.2%e v 10.1% prior.
• (CN) China Oct Trade Balance $64.0Be v $66.8B prior; Exports Y/Y: 22.45e v 28.1% prior; Imports Y/Y: 26.0%e v 17.6% prior.

OPEC+ declines to hike oil production

OPEC+ refused to bow to international pressure, leaving monthly production increases on an unchanged path. The grouping is blaming movements in the natural gas market for oil’s rise. Below the surface, the resumption of US/Iran nuclear talks would have meant zero chance of increased production, with even a remote possibility that the full weight of the Iranian output could return to international markets.

Brent crude and WTI had very volatile nights, trading in an almost three dollar range, before closing virtually unchanged in New York as the dust settled. A lack of movement from OPEC+ being cancelled out by a much stronger US dollar. In Asia, some physical dip-buyers have pushed Brent crude 0.40% higher to USD 81.25, while WTI has risen by 0.30% to USD 79.60 a barrel.

Notably, both contracts have now staged downside breakouts through two-month trendline support, and although both tested those breakouts overnight, their rallies petered out a negative technical signal. Potentially, oil’s correction lower, helped along by lower coal and natural gas prices, could still have some way to go. The absence of heavy Asian buying today on this dip suggests they feel the same.

Brent crude’s resistance is distant at USD 84.50 and USD 85.00 a barrel, with support at USD 80.00 a barrel. Failure is likely to another wave of speculative longs exiting. WTI has resistance at USD 83.50, while support is at USD 78.00 a barrel. Threats by President Biden to use “tools”, including SPR releases, will have only a temporary impact on prices. Oil’s fundamentals remain solid, and with the northern hemisphere winter approaching, this dip in prices is likely to be volatile but still transitory.

Gold’s rallies, but beware the false dawn

Gold had another volatile session overnight, rising by 1.25% to USD 1791.50 an ounce. The rally was especially surprising given that the US dollar resolutely rallied overnight. I can only surmise that the dovish Bank of England policy meeting and a wave of lower for longer buying in global bond markets supported gold as US real interest rates turned more negative.

Once again, the robust US dollar rally is a warning sign that both the global bond rally, and by default, gold’s rally may be luring investors into a false calm. Only an extremely weak US Non-Farm Payrolls print tomorrow night will give gold a chance to recapture USD 1800.00 an ounce.

Gold fell through its one-month trendline support on Friday, which is today at USD 1800.00 an ounce. That is followed by resistance around USD 1810.00 and then USD 1835.00 an ounce. Resistance above USD 1810.00 has been challenging, and only a close today above USD 1815.00 an ounce will change my bearish outlook. Failure of USD 1760.00 and USD 1750.00 should see gold retest USD 1720.00 an ounce.

Pound tumbles after BoE’s non-move

The Bank of England’s surprise call not to hike rates overnight sparked some volatility in currency markets as it led to a sharp retreat in yields across the US and Europe. Somewhat surprisingly, the US dollar outperformed, with the dollar index rising 0.51% to 94.33, where it remains in Asia. Given the moves in bond yields and gold overnight, the rise of the US dollar is perhaps a signal that rallies elsewhere will be temporary.

EUR/USD fell 0.50% to 1.1550 overnight, and support at 1.1520 looms. Failure signals more losses to 1.1400. Resistance is well-marked at 1.1615 and 1.1700. Sterling collapsed 1.30% to 1.3500 overnight post the BOE policy decision, and the street had clearly gone into the meeting long expecting a rate hike. Below, 1.3400 looms as sterling’s next significant support, and its fate will likely be decided by the tone of the BOE speakers this afternoon.

USD/JPY has fallen to 113.65 as US yields moved lower overnight. It remains a slave to the US/Japan rate differential and looks to set to continue ranging into the Non-Farm Payrolls. USD/JPY has support at 113.40, while a rise through 114.70 signals more gains above 115.00.

AUD/USD and NZD/USD both retreated overnight as the US dollar staged an impressive rally. AUD/USD is 0.65% lower at 0.7393 as of this morning and is testing its 100-day moving average at these levels, thanks, in part, to the dovish fence-sitting of the RBA. NZD/USD has slumped by 0.80% to 0.7090 as of this morning. A close below 0.7100 this evening signals a retest of 0.7000.

Asian currencies retreated modestly overnight before firming slightly today. Asian markets are marking time into tonight’s US non-Farm Payrolls. The strong US dollar rally in the DM space overnight is a clear warning, though, that a blowout payroll number to the topside and a consequent rise in US yields could see another wave of selling in Asian FX next week.

Eurozone retail sales dropped -0.3% mom in September, versus expectation of 0.2% mom. Volume of retail trade decreased by -1.5% for non-food products, while it rose for food, drinks and tobacco by 0.7% and for automotive fuels by 1.1%.

EU retail sales dropped -0.2% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Germany (-2.5%), Finland (-1.9%) and the Netherlands (-1.2%). The highest increases were observed in Estonia (+7.1%), Slovakia (+2.9%) and Luxembourg (+2.3%).

Full release here.

The US stock market traded mixed yesterday. At the close of the stock market the Dow Jones index decreased by 0.09%, the S&P 500 index increased by 0.42%, the NASDAQ index added 0.81%. The US Commerce Department release showed that the country's trade deficit increased to a record $80.9 billion in September from a revised $72.8 billion in August. The initial US jobless claims were 269,000 (forecast 275,000, previous 281,000), the lowest one since the pandemic began. Today, the US non-farm payrolls report will also be released. Analysts expect to see employment rise to 455,000 (previous 197,000).

Former head of the Fed Robert Heller said: "I think the Federal Reserve is behind the curve. They are starting to reduce the taper a little bit. There shouldn’t be any purchase of mortgage-backed securities in this booming housing market. And the U.S. government doesn’t need any support really either. ... I would reduce the asset purchases very quickly within two months or something like that, have it down to zero. And the policy rate I would start to lift right at the beginning of the year to get it back to a normal policy stance that is no longer further stimulating the economy."

Yesterday, European stock indices closed in the green area. Britain's FTSE 100 increased by 0.43%, Germany's DAX added 0.44%, France's CAC 40 increased by 0.53%, Italy's FTSE MIB added 0.53%, and Spain's IBEX 35 increased by 0.10%. Data from Germany's economy ministry released on Thursday indicated that the country's factory orders increased by 1.3% in September compared to the previous month. Analysts had expected to see an increase of 2%. The European service business activity index was 54.6 (previous value 54.7). This has been the slowest growth rate of service sector activity since April. The UK central bank did not change its monetary policy which came as a surprise to analysts. The Bank of England kept the interest rate at 0.1% and asset purchases at 895 billion pounds per month but hinted at the intention to hike the rate soon. On the back of this news, the British pound sharply fell. Analysts are now delaying expectations of the firstrate hike until February next year.

The oral antiviral drug against Covid-19 Molnupiravir from Merck and Ridgeback received approval in the UK.

OPEC+ ministers supported the decision to increase oil production by 400 thousand bpd and refused to increase supplies by 600 - 800 thousand bpd as the US, Japan and India had previously requested. OPEC+ representatives believe that such rates of oil production will be enough to cover demand in winter. Oil reserves will start to rise in December. The next meeting of OPEC+ will be held on December 2, 2021. Oil prices fell sharply amid this news.

The cost of aluminum fell below $2.6 thousand per ton for the first time since August 26.

The world food price index rose by 3% in October compared to September. It has been a record level since July 2011.

Asia-Pacific (APAC) stock indices were mostly decreasing on Friday amid renewed worries about the situation in the Chinese real estate sector. Japan's Nikkei 225 decreased by 0.61%, China's blue-chip CSI 300 decreased by 0.54%, Hong Kong's Hang Seng lost 1.69% However, Australia's ASX 200 was the exception and increased by 0.39%. The Reserve Bank of Australia, in its monetary policy statement today, indicated that recent data and forecasts do not justify an interest rate hike in 2022.

Main market quotes:

• S&P 500 (F) 4,680.06 +19.49 (+0.42%)
• Dow Jones 36,124.23 −33.35 (−0.09%)
• DAX 16,029.65 +69.67 (+0.44%)
• FTSE 100 7,279.91 +31.02 (+0.43%)
• USD Index 94.34 +0.48 (+0.51%)

Important events for today:

• Australia RBA Monetary Policy Statement (m/m) at 02:30 (GMT+2);
• German Industrial Production (m/m) at 09:00 (GMT+2);
• Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
• US Nonfarm Payrolls (m/m) at 14:30 (GMT+2);
• US Unemployment Rate (m/m) at 14:30 (GMT+2);
• Canada Unemployment Rate (m/m) at 14:30 (GMT+2);
• Canada Ivey PMI (m/m) at 16:00 (GMT+2).

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.1612
Prev Close: 1.1552
% chg. over the last day: -0.52%

After the ECB announced that its stimulus program won’t be cut this year, analysts changed their forecasts and expect an interest rate hike in Europe from 2023. Yesterday, the ECB spokesman De Kos said that at the moment, it is unclear about how long the current rise in inflation will last.

Trading recommendations

Support levels: 1.1535, 1.1502, 1.1453
Resistance levels: 1.1573, 1.1618, 1.1645, 1.1667, 1.1717, 1.1772

From the technical point of view, the EUR/USD on the hour time frame is bearish. But the price managed to return above the breakdown level, which indicates a possible false break move. The MACD indicator also indicates a divergence. Under such market conditions, traders should consider sell positions from the resistance levels near the moving average. It is best to look for buy trades from the support levels of lower time frames, but only with short targets.

Alternative scenario: if the price breaks out through the 1.1667 resistance level and fixes above, the mid-term uptrend will likely resume.

News feed for 2021.11.05:

• German Industrial Production (m/m) at 09:00 (GMT+2);
• Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
• US Nonfarm Payrolls (m/m) at 14:30 (GMT+2);
• US Unemployment Rate (m/m) at 14:30 (GMT+2).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.3687
Prev Close: 1.3498
% chg. over the last day: -1.40%

The central bank of Great Britain did not change its monetary policy. The Bank of England kept the interest rate at 0.1% and asset purchases at 895 billion pounds per month. Against this news, the British pound has sharply fallen. Analysts are postponing expectations of the Bank of England's first- rate hike until February next year.

Trading recommendations

Support levels: 1.3482, 1.3360
Resistance levels: 1.3562, 1.3616, 1.3685, 1.3748, 1.3780, 1.3831, 1.3886

On the hourly time frame, the trend on GBP/USD is bearish. The MACD indicator became negative, but there are signs of oversold, and the price has reached the resistance level of the higher time frame. Traders can look for buy trades on the lower time frames now, but only with short targets. It is best to look for sell deals from the resistance levels around the moving average, as a price has deviated strongly from the averages.

Alternative scenario: if the price breaks out through the 1.3685 resistance level and consolidates above, the bullish scenario will likely resume.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 113.99
Prev Close: 113.74
% chg. over the last day: -0.22%

In "urgent proposals" to implement Prime Minister Fumio Kishida's vision of "new capitalism," the group applied to the government to encourage businesses to raise wages using incentives, including tax breaks and subsidies. In general, the Japanese Yen is heavily influenced by the dollar index now, as Japan's stimulus program will remain until the end of the year.

Trading recommendations

Support levels: 113.42, 112.30, 111.53, 110.99, 110.65
Resistance levels: 114.48, 115.15

The main trend of the USD/JPY currency pair is bullish. The price is trading in a wide price corridor; there are signs of narrowing liquidity in the form of a "triangle". The MACD indicator has become inactive. Under such market conditions, it’s better to look for buy positions from the buyers' initiative zones on the lower time frames. Sell positions should be considered from the resistance levels of a higher time frame, given there is sellers' initiative.

Alternative scenario: if the price falls below 112.30, the uptrend will likely be broken.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2389
Prev Close: 1.2455
% chg. over the last day: +0.53%

The Canadian dollar is a commodity currency, so the USD/CAD currency pair highly depend on the dynamics of the dollar index and oil prices. The dollar index slightly increased yesterday, while oil prices decreased by the end of the day. As a result, the USD/CAD quotes significantly increased due to the strengthening of the US currency.

Trading recommendations

Support levels: 1.2428, 1.2352, 1.2306, 1.2260
Resistance levels: 1.2518, 1.2565, 1.2628, 1.2729, 1.2774

From the technical point of view, the trend of the USD/CAD currency has changed to bullish. The price broke through the priority change level and consolidated above. Under such market conditions, it is better to look for buy trades from the support levels, given there is the buyers' initiative. Sell deals should be considered from the resistance levels of the higher time frame.

Alternative scenario: if the price breaks down through the 1.2351 support level and fixes below, the downtrend will likely resume.

News feed for 2021.11.05:

• Canada Unemployment Rate (m/m) at 14:30 (GMT+2);
• Canada Unemployment Rate (m/m) at 14:30 (GMT+2).

• BoE shocks markets by not raising rates as expected, pound crashes below $1.35
• Bond yields slump globally as central banks push back on investors’ rate hike pricings
• Dollar stands tall, Wall Street at a record ahead of October payrolls report

BoE: the unreliable boyfriend strikes again

The messaging was clear, or so everyone thought. Repeated signalling by Bank of England Governor Andrew Bailey that the Bank will need to act to keep a lid on surging inflation had led markets to price in at least five rate increases over the next year. However, the BoE badly wrong-footed markets on Thursday by holding fire on rates, with policymakers wanting to wait and see how the labour market would respond to the end of the UK government’s furlough scheme.

Bailey told reporters in his press conference that the decision was “a very close call”. But the MPC vote suggests otherwise. Only two committee members voted in favour of raising rates at the November meeting, which not just cast doubt on the BoE’s credibility but also suggested that a rate hike in December was unlikely, even as the statement flagged that an increase in the Bank Rate “will be necessary over coming months”.

Investors sharply repriced their bets on how aggressively the BoE would tighten policy, though with close to four rate hikes anticipated in 2022, the main adjustment was for policy holding steady in 2021. There’s a risk that markets are still expecting rates to rise by more times than what policymakers are pencilling in because the BoE’s forecasts were conditioned on energy prices not falling by as much as what futures curves are implying. If energy prices were to drop off more steeply than in the Bank’s central projection, UK CPI is predicted to fall substantially below the 2% inflation target at the end of the forecast period.

The pound reacted the only way it could, shedding 1.5% at its lowest point when it plummeted below the $1.35 level, having traded just beneath $1.37 earlier in the day.

Risky currencies pressured from plunging bond yields, oil rebound falters

But the aftershocks of the BoE’s actions weren’t confined to the FX sphere. The yields on UK gilts nose-dived, particularly two-year yields, and it was a similar trend across the bond market. Bond yields had already been under pressure since Wednesday when both the Fed and ECB pushed back on speculation of pre-emptive rate hikes to fend off spiralling inflation.

With the major central banks holding firmly to the narrative that the current inflationary episode will be transitory, sovereign bonds are rallying, lifting stocks but weighing on the riskier currencies.

The commodity-linked dollars have all dipped to around three-week lows against both the US dollar and the low-yielding Japanese yen. The euro’s fall has been milder in comparison but remains distinctly on the backfoot.

The Canadian dollar would probably also have been able to get off more lightly if it wasn’t for the slide in oil prices. As expected, OPEC and its allies yesterday decided to maintain the existing pace of phasing out the supply curbs, boosting output by only 400,000 bpd.

Oil futures initially rallied but reports that Saudi Arabian output could soon hit 10 million bpd and fears that the United States might tap into its strategic reserves in response to OPEC’s refusal to pump more oil pulled prices lower.

Will there be a positive NFP surprise this time?

As yields pull back, there is now an increased risk of a reversal should today’s jobs numbers out of the US beat the consensus estimates. After two back-to-back disappointing reports, the US labour market is expected to have picked up a gear. Nonfarm payrolls are forecast to have risen by 450k in October.

Although the data is unlikely to have much of an impact on the Fed’s policy outlook as tapering has already started and rate hikes are not on the immediate horizon, it could jolt US Treasuries, which in turn would move the dollar.

The greenback is creeping up towards last month’s one-year top against a basket of currencies in spite of the Fed’s dovish taper announcement this week as investors remain more optimistic about the American economy than its peers.

The only way is up for stocks

As for equities, the S&P 500 and Nasdaq 100 appear to be headed for another open in record territory following yet more fresh all-time highs on Thursday, while the Dow Jones took a breather from the recent winning streak. European stock markets are also riding high as the dovish central bank talk is boosting equities on both sides of the Atlantic, underlined by the retreat in bond yields.

However, shares in Asia were struggling on Friday amid renewed concerns about China’s heavily indebted property sector after another major property developer missed a payment on a wealth management product.