News & Analysis

Risk roars GBP – AUD surge; Dow rally continues up over 900 in three sessions; NFP due tonight

Nov 2, 2018 | Market Updates

Upcoming high impact news:

11:30 AUD Retail Sales
23:30 USD Average Hourly Earnings – Non-Farm Employment Change – Unemployment Rate CAD Employment Change – Unemployment Rate

Further strong moves from  US stocks as the recovery continues to steam ahead. The Dow added 264, taking its last three days to 900+ points. The S&P500 added 1.1% and the Nasdaq gained 128 pts. Apple disappointed with earnings, its share price dropping 7%. The company missed shipment estimates on iPhones, offered light guidance and announced major changes to its reporting structure. It fell below its historic $1 trillion market cap after the following the release.

President Trump commented via a tweet – Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had a good discussion on North Korea! This also added to risk demand as risk currencies, in particular, jumped to the USD.

“I don’t think we’re out of the woods yet,” said Aaron Clark, portfolio manager at GW&K Investment Management. “Sentiment has clearly changed more than fundamentals.” “I think we were oblivious to the risks we were facing … Now we’re sort of walking on eggshells,” Clark said. With yields and rates still, factor traders will be looking with interest to tonight’s average earnings and employment data.

Oil ignored positive influences and continued to plunge lower. US crude dropped 2.5% making fresh 7 month lows hitting 63.69. Supply continues to be the main worry, Russia, OPEC and the United States are pumping more oil before U.S. sanctions on Iran return in full force next week.

Gold jumped as the USD was trashed. Price 19 dollars higher hitting 1237 for its session high before closing at 1233. The USD was sold heavily as US-China talks continued to look positive. Poor ISM Manufacturing data also added to its decline. The main story was about the risk currencies. The GBP started the jump as a Brexit agreement on financials hit the market in the Asian session. The GBP flew higher adding 238 pips to the USD and 240 pips the Yen. The EUR jumped 97 to the USD. The AUD was another bigger winner last night, jumping by 131 to the USD and closing back above .72. It also added 131  to the JPY.

The BOE held rates as expected and Governor Mark Carney said a no deal, no transition Brexit is not the most likely scenario.  Focus will now turn to the US for tonights US employment data. Average Earnings and the NFP could play a key role in the continuation of risks rally. The market is looking for 0.2% from Average earnings and a 194K increase in the NFP figure.

Good Trading from Eightcap

Sources; CNBC – All times are AEDT

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