US Open Note – Stocks buoyant, dollar flashes green and commodities resilient

Market sentiment intact after cheery jobless claims and miss in US PPI

Sentiment remains upbeat as US stock futures are extending their recent buoyancy after a drop in longer-term yields. The Fed’s meeting minutes published yesterday echoed the recent hawkish rhetoric, signalling that the taper timeline is likely to begin before the end of the year and fuelling expectations of an earlier rate hike. However, investors are now eyeing a lower terminal rate as a result of earlier action by the Fed.

Rising energy prices and the push higher in short-term yields are feeding inflation, increasing concerns around the narrative that inflation may become more persistent. Moreover, softer 10-year yields have added to the greenback’s recent easing power, which has stretched across the forex arena.

The miss in the US producer price index (PPI) reiterates the fact that September US headline inflation (0.4%) was driven more so by rising energy prices. Headline monthly PPI came in softer at 0.5%, from expectations of 0.6%, while the Core PPI number dropped to 0.2%, from an estimation of 0.5%.

The number of people filing new claims for unemployment benefits fell to 293K in the previous week, way below the forecast of 319K despite the lasting effects of the pandemic. This has overshadowed the PPI results and has been supporting the greenback today.

The dollar index surrendered ample might over the last two days diving to 93.75 but has recently plotted minor improvements.

The euro and the pound are experiencing marginal pullbacks in their Wednesday follow-through traction to the respective $1.1620 and $1.3715 levels, fuelled also by yesterday’s stronger monthly production figures. The euro and the pound are now flirting with the $1.1600 and $1.3700 round numbers. The euro is likely to lag as the pace of QE picture remains unclear and the ECB remains dovish.

The swissie dipped below the 0.9200 handle and the USD/JPY pair is largely unchanged around 113.33 despite the dollar’s latest weakness.

Commodities and their linked currencies; mixed Australian jobs data

The antipodean currencies are among the best performers with the aussie reaching 0.7420 and the kiwi 0.7039.

Australia’s jobless rate declined to 4.6% in September from 4.8% despite little progress in wage growth and less people in employment in September. As lockdowns continue, lower unemployment and dollar weakness have kept the aussie buoyant in spite of today’s softer Chinese inflation numbers.

Gold is flirting with the $1,800/oz mark after its recent aggressive appreciation in price due to a drop in yields and the greenback.

WTI oil futures continue gearing up reaching $81.60 per barrel. The oil dependent loonie has steered lower to C$1.2382, largely on rising oil prices and a weaker dollar.

FOMC Members Bostic and Barkin are due to speak at 14:00 and 17:00 GMT.

US natural gas storage figures will be released at 14:30 GMT, while US crude oil inventories are scheduled for 15:00 GMT.

The UK’s Monetary Policy Committee Member Mann is speaking at 14:40 GMT, while at 21:30 GMT, New Zealand’s Manufacturing Index result is booked.

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