Today is all about payrolls, if the NFP number comes out between 130K and 250K we most probably are not going to see large movements in the forex market. A NFP number below 130K or above 250K will create good trading opportunities. Markets will start to raise questions about Fed’s ability to hike rates later this month only with a number weaker than 130K. It is vital to focus on average hourly earnings which will give the latest insights about the direction of inflation.
Crude oil continues to move higher and we continue to see bearish corrections as buying opportunities. If the OPEC deal is fully implemented by all countries, we should see crude oil close to $65 in few months’ time.
The vast majority of equity market (except financial sector) continue to move significantly lower as another hike later this month expected to come, the more sensitive the sector is to higher rates the larger the drop. The divergence between NASDAQ and S&P500 increase as NASDAQ (technology sector) performs poorer on higher rates. Basically we see something very similar from what occurred one year ago, one day after Fed decision to hike last December, immediately started a 12% drop for equity market which lasted more than one month.
Pound yesterday had a significant bullish reversal as some breaking news mentioned that UK could pay to stay part of the single market after the Brexit vote. It will be very critical to identify during the next period if this information is close to reality or it simply another firework that we hear and see from time to time.
Breaking news during late evening hours that the ECB will eventually end the bond buying program after December meeting sent euro higher and Eurostoxx lower however similar ‘’breaking news’’ few months ago failed to find confirmation from ECB.
Sunday’s Italian referendum and Austrian elections do not help to have a risk appetite mood today. Unquestionably it will be a good idea to close our trading positions before the weekend. Markets overestimate the risk from the Italian referendum and it underestimate the risks from the Austrian elections, a country which has tradition to give extremely high percentage to far right ant anti-European parties.
Daily Key points:
• China manufacturing sector expands at fastest pace in 2 years
• Dollar loses steam after hitting 9 ½ month high against yen
• UK PM May ‘Extremely Confident’ Of Triggering Article 50 By End-March
• Italian PM Renzi: No Alternate Budget Plan In Case Of No Vote
• Turkish Lira near another record low
• Holland do not seek to be re-elected as France’s president next year.
Daily Economic calendar:
|USA||Average Hourly Earnings m/m||HIGH||0.4||0.2||USD||16:30|
|USA||Non-Farm Employment Change||MUST||161k||180k||USD||16:30|
|USA||AFOMC Member Brainard Speak||MEDIUM||N/A||N/A||USD||16:45|