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Bullet Report: Today is the Most Important Event of the Month (and it’s not related to the elections)
Today’s focus will be the most important news release of the month, Non-farm payrolls, released at 13:30 GMT. The report reveals the total number of workers that are added to the US economy on a monthly basis. Always released on the first Friday of each new month, it is the most important barometer for the health of the US economy and almost always sparks increased volatility. With the FED just about to increase interest rates in December, a disappointing report could change that, which could ignite a USD selloff of a large extend. Yesterday, risk aversion continued to dominate financial markets and the Value of the USD continued to erode.
Currencies: Despite the elections looming in 5 days, the NFP will still be a major determinant to the Fed’s intention to raise rates in December. On Wednesday, FOMC day, the FED stated that it will remain open to evidence of continued progress, before it decides to hike rates. It can be assumed that a very weak number from the NFP will be this evidence the FED referred to, and which could force the FED to derail from raising rates in December. Economists polled by Reuters are looking for non-farm employment to have risen by 175,000 in October from 156,000 in September. This week, the USD suffered some losses after hitting a 9-month high last week, following the latest polls showing that the difference between Trump and Clinton is narrowing. In other currencies, the GBP was the biggest gainer yesterday, reaching all the way to 1.2490, a 1-month high, after the UK’s high court ruled that the government needed parliamentary approval to trigger procedures to leave the EU, easing Brexit fears for the time being. Also a reason for the surge, was the fact that Governor Mark Carney suggested the central bank has “a neutral bias around policy going forward” as the “monetary policy can respond in either direction”. In other words, a rate cut does not look to be a possibility in the near future.
Stocks: Markets have been mostly lower worldwide as the elections comes closer and the Gap between the two candidate’s narrows. Yesterday the SP500 recorded its longest losing streak in history (8 days), Today Asian shares slipped and markets in Europe have also gapped lower. Germany’s DAX is trading at a month low (10285) while UK’s FTSE is at a critical support level (6270) which if broken, could spark further selloff.
Oil and Gold: Oil prices recovered slightly after falling more than 1% on Thursday as investors reacted to a surge in Crude oil stockpiles in the US. Crude oil added 0.3% to $44.79 per barrel while Brent also rose 0.3% to $46.47. Gold has gained yesterday in cautious trade ahead of the US jobs data later today. Prices have topped at 1307 and traded within a narrow range since then. Gold is always the biggest mover on NFP day, so prepare for headlines on the yellow metal tomorrow (most likely).
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