- Main drivers: Mixed sentiment early today; Inflation fears growing; FOMC’s Daly sees FOMC on track; hawkish Bank of England comments help GBP; Columbus Day in the US, no major economic data due
- Mixed sentiment: The uncertainty created by the weaker payrolls report and it being Columbus Day today for the US means that markets have a mixed look to them.
- Yields higher on inflation fears: Bond markets are shut in the US today, but bond yields moved sharply higher on Friday on building inflation fears. With oil almost +2% higher again today, these fears remain. [Risk negative]
- FOMC’s Daly: In response to the weaker payrolls report, FOMC’s Daly (2021 voter, mild dove) noted that there will be ups and downs in the labor market recovery but the FOMC remains on course. [USD supportive]
- Bank of England’s Saunders hawkish: Saunders (a hawkish dissenter on the MPC) suggested that interest rate increases could come “significantly earlier” than previously anticipated. He feels that a February hike (that is priced in by interest rate futures markets) would be appropriate. Worth noting that Saunders is considered the most hawkish MPC member. [GBP supportive]
- Central bank speakers: FOMC’s Charles Evans (2021 voter, dove) speaks at 2200GMT.
- Data watch: No data due today
- Broad outlook: Equity markets looking cautious again; USD mixed in the wake of payrolls; GBP gaining ground; Precious metals struggling, oil higher again.
- Forex: EUR/USD picked up off weaker than expected NFP. We would still see any strength as a selling opportunity. Initial resistance 1.1585/1.1600. We prefer medium-term short positions for further downside. GBP/USD near term recovery threatens on comments from BoE Saunders. Above 1.3665 opens 1.3730. We still prefer to sell into strength and medium term short positions. AUD/USD breaking through resistance around 0.7315. A close above 0.7350 opens recovery towards 0.7410/0.7475. Initial support at 0.7290.
- Commodities: Gold is still unable to hold any upside traction, with resistance mounting between $1780/$1790. A close back under $1745 re-opens $1722 again. We still prefer using strength as a chance to sell. Silver is still unable to overcome key resistance $22.75/$23.00 that would open a recovery. With resistance intact and medium-term momentum indicators negative, we prefer short positions to retest $22.00 and $21.40. Brent Crude oil seeing three-year highs again today and is eyeing a test of $86.95.
- Indices: Recent recoveries seem to be rolling over once more. S&P 500 futures have been unable to hold above 4388 and is now threatening lower once more. A decisive move below 4364 re-engages selling pressure. Resistance mounting 4388/4420. DAX rebound is again struggling around 15,265 resistance and this leaves the focus on testing 14,810/15,000 again. FTSE 100 holding up surprisingly well, but resistance is growing between 7120/7160. The buyers are struggling to hold upside traction.