The narrative today could shift towards the release of the US Employment data.
MORNING OVERVIEW
The markets may be preparing for the release of the US Employment data for August in tomorrow’s American session. Considering the gravity of the release and that it is the last employment data prior to the Fed’s interest rate decision, the market narrative today may be primarily dictated by tomorrow’s releases. Over in Asia, the JPY surged overnight with market participants wondering if the surge was as a result of an intervention, or due to of higher interest rate expectations. Lastly, President Trump said that Iran strikes are to be short, which may infer that the tensions between the two nations could ease, which may weigh on oil prices.
MARKET SNAPSHOT
| MARKET | CURRENT | CHANGE | COMMENT |
| S&P 500 | 7668 | +0.03% | N/A |
| USD/JPY | 156.7 | -1.25% | Surge in the JPY overnight |
| DXY | 99.217 | -0.38% | Markets may be preparing for NFP Friday |
| EUR/USD | 1.1611 | +0.20% | Could be as a result of a weakening dollar today |
| Gold | 4423 | +0.83% | Markets preparing for NFP Friday |
| Brent Crude | 94.607 | -1.07% | Easing of tensions in the Mid-East |
KEY MARKET THEMES
01 — JPY surges overnight
The JPY has surged overnight, sparking speculations about a possible government intervention in the currency. On the other hand, some market participants are pointing to the increased possibility of the BOJ hiking rates in their next meeting. Moreover, on Wednesday BOJ member Hajime Takata reinforced speculation among investors that the bank could take a more aggressive monetary policy stance that generally speaking “back to back rate hikes” could be a possibility. In turn the comments by the BOJ member may have facilitated the Yen’s strengthening.
Market implication (JPY) : Bullish
02 — US strikes on Iran to be short lived – President Trump
President Trump said that renewed attacks on Iran would likely be short-lived, whilst re-iterating his claim that Washington continues to control the Strait of Hormuz. Furthermore, when ask about the duration of the bombing campaign the President replied “I don’t think too long”. In turn the possibility of the easing of some tensions and the halting of the US’s bombing campaign, may have weighed on oil prices and should it be indeed short lived, it may increase downwards pressures on oil prices.
Market implication (OIL): Bearish
03 — Switzerland’s inflation print comes in hotter than expected.
Switzerland’s CPI rates for August where released earlier on today. The inflation print came in hotter than expected, implying an acceleration of inflationary pressures in Switzerland’s economy. In turn, an acceleration of inflationary pressures could lead the SNB to adopt a more hawkish stance should inflation continue on it’s current trajectory, thus possibly aiding the CHF.
Market implication (CHF): Bullish
WHAT MATTERS TODAY
ISM-Non Manufacturing PMI figure for August
- Time (GMT+2): 17:00
- Expected: 54.2
- Previous: 54.1
The financial release tends to paint the picture for the services industry as well as others and can be used as an economic gauge.
Potential market reaction: Should the financial release come in as expected or higher it may aid the dollar, whereas anything lower may have the opposite effect.
Canada’s Trade Balance data for July
- Time (GMT+2): 15:30
- Expected: 3.57B
- Previous: 3.86B
Trade balance data may be an indication of the demand for a nation’s currency i.e higher exports may results in a higher demand for Canadian dollars.
Potential market reaction: The data is set to show a reduction in Canada’s trade surplus which could weigh on the Loonie
FED / Governor Waller
Time (GMT+2): 15:30
Fed Governor Waller is set to speak today. Depending on his comments, the dollar may be influenced. For example, should Waller imply that the bank may be leaning towards a rate hike and may remain on a rate hiking path in the future, it may aid the dollar and vice versa.
ASSET FOCUS
GOLD / COMMODITIES
Gold’s price appears to have halted its decent, with the commodity’s price appearing to recover some ground. The precious metal may be of interesting considering the upcoming US Employment data and the continued geopolitical narrative in the Mid-East.
KEY LEVELS
- Resistance (1): 4520
- Resistance (2): 4695
- Support (1): 4340
- Support (2): 4180
- Technical / Fundamental View: Neutral
CROSS-ASSET VIEW
| ASSET CLASS | BIAS | KEY DRIVER |
| Equities | Neutral | Awaiting US Employment data |
| Gold | Neutral | N/A |
| Oil | Bearish | President Trump’s comments |
RISKS TO THE VIEW
The increase of tensions in the Mid-East between the US and Iran
The market’s appear to be slightly calmer with President Trump noting that the US’s bombing campaign may not last long. However, a significant escalation could upend our views.
TRADING SPHERE VIEW
Markets may be gearing up for NFP Friday, so attention is already moving towards tomorrow’s financial releases.
TODAY’S WATCHLIST
- 01 [ISM Non-Manufacturing PMI figure]
- 02 [Fed Governor Waller’s speech]
- 03 [Canada’s Trade balance figure]
Disclaimer:
This information is not considered as investment advice or investment recommendation but instead a marketing communication.
