Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
AKCJA
The dollar managed to remain firm last Friday, despite an abysmal jobs report. The September non-farm payrolls numbers were objectively terrible, enough to challenge the prevailing narrative of a resilient labour market, falling short of even the most pessimistic of expectations. The headline number came in at just 29k jobs, a far cry from the predicted 90k, while the U-3 unemployment rate ticked up to 4.2%, beating both the forecast figure and the prior reading. Adding insult to injury, the BLS subtracted 29k jobs from the August estimate, and 21k from the July statement, resulting in a net loss of 10 thousand for that month. The shocking report all but cements an interest rate pause during the next FOMC decision at the end of October, with FedWatch now showing implied odds of only 22% of a rate hike three weeks from now.
For all the bad news, the long-term outlook on the dollar has not fundamentally changed. Yields on the 10-year US Treasury note remain at highs of 5.27%, while those on the 30-year are offering 5.61%. Markets are universally expecting high inflation and high bond yields for the foreseeable future, and no major economic zone looks structurally stronger than any other. Just as markets were grappling with Friday’s NFP report, European CPI figures revealed a nasty spike in inflation within the common currency area, with the headline rate rising to 3.8% in September from 3.2% the prior month. The French bond market is looking particularly jittery, as yields on the 10-year drew uncomfortably close to 5% last week, approaching multi-decade highs and growing further apart from the lower yields offered by German debt. France’s total debt burden soared to 119% of GDP in June, the highest level since 1946, while growth is expected to hit an unimpressive 0.7% this year.
All things considered, the DXY dropped a grand total of 0.12% on Friday, proving that currency traders have bigger things to worry about than jobs figures. The deafening silence around precious metals tells the same story; gold and silver are facing an uphill battle in light of the 5-6% yields on offer elsewhere. Semiconductors continue to drag US indices higher, but market breadth is completely non-existent. The geopolitical quagmire in the Middle East is showing absolutely no signs of improvement, while Brent Crude sits comfortably at $102 per barrel. And yet, for all the turmoil, crypto remains shockingly resilient. In the absence of any clear winner, the cold calculation turns to one of relative misery. Bitcoin rose back up to $86,000 on Sunday night and is very nearly in the green for the year. Investors are running out of places to park their cash.
As dawn breaks on the fourth quarter, the economic calendar trickles to a halt. Trading floors across China will remain dark until Wednesday due to the country’s golden week market closures. On Monday, the ISM PMI figure will shed some light on the US service sector, which is forecast to remain firmly in expansion territory. Wednesday will see the release of the latest FOMC minutes, offering an insight into how panicked different board members are with regard to inflation. Finally, Friday will deliver the preliminary report of the Michigan Consumer Sentiment.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
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