Optimism for the US Dollar
A largely anticipated NFP left the markets indecisive going into the new week after a stronger than expected unemployment rate and average hourly earnings emitted doses of optimism for the US Dollar. 1.3mln jobs were added to the economy last month which was very much in line with expectations. Going into the week the DXY remains subdued beneath the 93.00 handle as the US markets remain closed in observance of labour day.
Last week saw Australia slide into its first recession in 30 years after a slump in GDP figures left the nation down over 6% from the previous figure reported at -0.3% . In amongst all of this, the state of Victoria has also extended their Stage 4 level restrictions for another two weeks after another cluster of Covid-19 cases having been reported. This week, the focus will shift towards the ECB Monetary Policy Statement and press conference set to hold on Thursday as well as the Rate statement set to be released from Canada on Wednesday.
The UK and EU
The UK and EU will reconvene once more this week as the deadlock on post trade talks looks to be broken. Both sides remain still very much far apart in terms of a trade agreement and many from the UK government have now began to prepare for a no-deal Brexit. PM Johnson outlined his desire to reach a conclusion by October 15th and stressed that if an agreement has not been made then both parties should ‘accept it and move on’. Johnson reiterated that an Australian style agreement will still be a ‘good outcome’ for the UK. This comes as the nation is reportedly planning new legislation to override the withdrawal agreement which could threaten negotiations from advancing. The major sticking points continue to surround fisheries and state aid. On the other hand, EU Chief Negotiator Barnier is insisting that the UK must agree not to implement any changes to UK legislation that distort trade with the EU without consulting Brussels. In amongst all of this, EUR/GBP trades around a key value area; 0.8950.
In the US
In the US, virus cases remain steady though the infection numbers in the UK have increased by the most in more than 3 months. With schools around Europe also set to resume, cases in Germany and France also notched higher. The nation of China has decided to take a stronger stance on their battle against the virus as they look to tighten testing requirements for all passengers arriving from the US. All passengers will now be required to provide negative test results within three days of their flight in order to be permitted to board. Total cases in the US rose to 6.23mln from 6.18mln whilst the nation of India has overtaken Brazil as the country with the world’s second highest number of cases.
WTI Crude came under pressure going into Monday as reports suggest that the largest oil exporter; Saudi Arabia have lowered their oil prices to Asia and US customers for shipments due in October. This move highlights that the nation may view the current demand as weaker than most considered due to a resurgence in Covid-19 cases globally. WTI slid lower by 8% last week on the dampened risk tone and currently trades sub $40/bbl. Gold continues to tread carefully around the $1,930 level after reaching highs of $1,992 last week though this was very much short-lived, and price dropped some 3% on a stronger USD as the week progressed.
In the cryptocurrency space
Meanwhile in the cryptocurrency space, ETHUSD which traded to highs of $490 last week collapsed lower after shedding almost 30% as the week progressed. The Cryptoasset now trades around the $350 handle after violating previous support around $365. BTCUSD broke below both its 50 and 21 EMA on the daily timeframe after putting in a similar correction last week. Price is currently attempting to hold above the $10,000 level at $10,160.
Here is a breakdown of the high impact data releases this week.
15:00 BOC Rate Statement & Overnight Rate. Markets to watch: CAD Crosses
Thursday 12:45 Main Refinancing rate & Monetary Policy Statement. Markets to watch: EUR Crosses
13:30 ECB Press conference. Markets to watch: EUR Crosses
17:30 BOC Gov Macklem speaks. Markets to watch: CAD Crosses