MORNING OVERVIEW
The US employment data for August, which was released on Friday came in better than expected. In particular, the NFP figure vastly exceeded expectations by coming in at 162k, which in turn may have aided the dollar. In the commodities markets, oil is of interest following the US striking three Iranian crude tankers.
The objective: Key focus on the dollar and the oil markets, whilst the EUR prepares for the ECB’s interest rate decision this week.
MARKET SNAPSHOT
| MARKET | CURRENT | CHANGE | COMMENT |
| S&P 500 | 7717 | -0.01% | Fed rate hike expectations |
| DXY | 99.10 | -0.08% | Stronger NFP figure |
| EUR/USD | 1.1617 | +0.02% | ECB decision this week |
| Gold | 4395 | -0.84% | Possibly influenced by USD |
| Brent Crude | 97.215 | +0.98% | US-Iran exchange blows |
KEY MARKET THEMES
01 — US and Iran exchange blows as tensions continue to escalate
Tensions between the US and Iran have increased significantly, as the US struck three Iranian crude tankers. On Saturday, the US military said that its forces struck three Iranian crude oil carriers after the Islamic Revolutionary Guard Corps launched ballistic missiles toward two US Navy warships.
Market implication (OIL) : Bullish
02 — Eurozone revised GDP rate for Q2 due out today
The Eurozone’s revised GDP rate for Q2 is due out today and is expected to come in at 0.4% which would be the same rate as the prior financial release. The financial may garner attention as the ECB’s interest rate decision is set to take place later on this week, with the bank expected to hike rates. Hence, any financial releases stemming from the Eurozone may see an increase in their market impact.
Market implication (EUR): Neutral
03 — US Employment data exceeds expectations
The US Employment data for August was released on Friday, which tended to showcase a resilient labour market. In particular, the NFP figure vastly exceeded expectations by coming in at 162k versus the expected figure of 56k. In turn, the dollar may have found support as the release intensified market expectations of a Fed rate hike in their meeting next week. Moreover, the financial release could allow for a more hawkish sentiment to emerge in the Fed’s accompanying statement. As a reminder, the Fed is now in its blackout period.
Market implication (USD) : Bullish
WHAT MATTERS TODAY
Eurozone Revised GDP rate Q2
- Time (GMT+2): 12:00
- Expected: 0.4%
- Previous: 0.4%
Showcases the state of the Eurozone’s economy
Potential market reaction:
Better than expected rate, showcases an expansion of economic growth which could aid the EUR.
WHAT MATTERS TOMORROW MORNING
Japan GDP revised Q2
- Time (GMT+2): 02:50
- Expected: 1.6%
- Previous: 1.1%
GDP rates showcase the state of the Japanese economy
Potential market reaction:
Could provide support for the JPY.
ASSET FOCUS
[GOLD / COMMODITIES]
Gold appears to be moving in a sideways fashion for now after failing to clear our 4520 (R1) resistance line.
KEY LEVELS
- Resistance (R1): 4520
- Resistance (R2): 4695
- Support (S1): 4330
- Support (S2): 4180
Technical / Fundamental View: NEUTRAL
CROSS-ASSET VIEW
| ASSET CLASS | BIAS | KEY DRIVER |
| Equities | Neutral | Fed rate expectations |
| USD | Bullish | Overall bullish leading up to Fed decision |
| Gold | Neutral | Geopolitical tensions/Fed |
| Oil | Bullish | US-Iran exchange blows |
RISKS TO THE VIEW
The biggest risk to our views for today may be geopolitical developments
The US-Iran situation continues to be volatile and fast paced in terms of the developments. Hence our view is that any developments between the US and Iran pose the greatest risk to our view.
TRADING SPHERE VIEW
Bullish for oil prices
Our base case:
As tensions continue to escalate between the US and Iran, oil prices may continue to rise. We may see some commentary trying to downplay the current situation, but it may not be enough to calm the market’s worries.
What would change our view:
A genuine attempt to de-escalate the situation
TODAY’S WATCHLIST
01 Eurozone revised GDP rates
Disclaimer:
This information is not considered as investment advice or investment recommendation but instead a marketing communication.
