Daily Wrap Up 04 October 2022

4 Oct 2022 04:18 PM

USD tanks on jobs report, equities jump  

Stock markets are still benefitting from the chatter the Federal Reserve might look to ease up on the pace it is hiking interest rates. Yesterday, the US ISM manufacturing missed economists’ forecasts and it flagged up some potential areas of weakness in the economy, and that acted as the catalyst for the speculation the US central bank might look to gently apply the brakes on its hiking cycle. In the past few weeks, we have seen interventions in the markets from the Bank of Japan and the Bank of England, and that contributed to the view Fed might move down a gear with respect to increasing interest rates. Last week, Fed member James Bullard, said the possibility of a recession has increased and, in that case, that might prompt some central bankers to take a more relaxed approach.

The JOLTS updated added to concerns about the health of the US economy as it showed there were 10.05 million job openings in August, and that was a big fall from the 11.17 million in the previous update. Traders were used to the idea there were lot of job openings, but employers were finding it difficult to fill the vacancies, but now there was a drop of over 1 million job openings, that speaks to companies being less optimistic in their outlook. The US dollar was already suffering today, and then the JOLTS report ramped up the selling pressure.

Sterling is higher once again thanks to the government’s U-turn the tax cut. Bargain hunters are still focusing on the pound as traders are far less fearful about the health of the UK economy. The Reserve Bank of Australia lifted rates by 25-basis points, but the consensus estimate was for a 50-basis points hike, and the Australian dollar is weaker across the board.

The brutal fall in the US dollar is helping commodities. Gold is up over 1%, partially because of the fall in the US dollar, but also due to the fall bond yields. Silver and copper are enjoying gains too. WTI and Brent crude are up over 2% ahead of tomorrow’s OPEC+ meeting, as there is speculation the body will deliver a large production cut.

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