Spot values at a glance:
Asian equities largely gained across the board. China markets resumed following a week-long national holiday. The US dollar opened the week lower today, following 4 consecutive weekly gains, while gold rose to 1-week high amid renewed geopolitical concerns over the weekend. Investors will be keeping an eye out for the FOMC’s latest meeting’s minutes this week.
President Donald Trump returned to his outlandish statements against North Korea in a series of tweets. In comments this weekend, he said “Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid hasn’t worked, agreements violated before the ink was dry, makings fools of US negotiators.” He went on to add that “only one thing will work,” implying he may have settled on a military option against North Korea and its leader Kim Jong Un.
Meanwhile, Kim has promoted his sister to the ruling party’s political wing, and reports are saying that North Korea is planning to test a missile that its officials claim could be capable of reaching the US West Coast.
The US and Turkey each suspended visa services for citizens looking to visit the other country, a sharp escalation of a diplomatic spat that sent the lira down more than 6% against the US dollar. The moves followed the Oct. 4 arrest of a Turkish national who works at the US. consulate in Istanbul for alleged involvement in the July 2016 coup attempt against President Recep Tayyip Erdogan.
US Nonfarm Payrolls:
The number of US payrolls declined in September for the first time since 2010, reflecting major disruptions from hurricanes Harvey and Irma, Labor Department figures showed Friday. Payrolls fell 33,000 (vs. est. +80,000), compared to a 169,000 advance (upwardly revised) in August.
Average hourly earnings rose by 0.5% month-on-month, faster than the median consensus of 0.3% and August’s 0.2% rise.
The jobless rate fell to a new 16-year low of 4.2%, lower than the median forecast of 4.4%.
In a 220-page report released Friday, the Treasury Department laid out a series of recommendations to roll back regulations affecting the largest banks, hedge funds and exchanges.
“By streamlining the regulatory system, we can make the US capital markets a true source of economic growth which will harness American ingenuity and allow small businesses to grow.” Treasury Secretary Steven Mnuchin said in a statement.
While some of the changes would require congressional action, most can be accomplished by re-writing rules, which would entail far fewer hurdles than legislation. The study was spurred by President Donald Trump’s February executive order calling for a broad rethink of financial regulations.
Canadian Wages Accelerate:
Canada’s labor market showed more signs of tightening in September, with the tenth straight month of employment gains and the strongest wage increases in more than a year.
Annual average hour earnings gained 2.2% from a year ago, the fastest since April 2016. Meanwhile, employment last month increased by 10,000 (vs. 12,000 est.), reflecting a gain in 112,000 full-time jobs which offset a loss of 102,000 part-time jobs.
Canada’s labor market has generated the most jobs this year since the country emerged from the last recession. Robust employment is boosting incomes and helping fuel a consumption binge that’s made the country’s economy the fastest growing in the Group of Seven. On the flip side, employment gains are slowing, in line with an expected second-half cooling in the economy. Employment gains have averaged about 14,000 over the past 3 months, less than half the pace of earlier this year.
Chinese stocks rose, led by banks, as the nation’s financial markets reopened after a week-long break. The benchmark gauge rose 0.8%, led by bank shares.
China’s retail and restaurant sales during the Oct. 1-8 National Day holidays rose 10.3% from last year to 1.5 trillion yuan, according to a statement posted Sunday on the Ministry of Commerce’s website
The PBOC could adjust monetary policy again in the coming months, in response to changes in the economy or the shifting agendas of top political leaders following the 19th Party Congress, according to Goldman Sachs Group Inc.
The Caixin China PMI composite for September declined to 51.4, from 52.4 in August. PMI services fell as fell, from 52.7 to 50.6.
- Spot 1.3638
- USDSGD has gained for 4 consecutive weeks, although the pair is likely to find strong resistance around the 1.3700 level.
- A move above 1.3700 would confirm the technical breakout of its year-to-date long downtrend; the next resistance lies around the 1.3900 handle.
- Spot 0.7760
- Following last week’s break below the 0.7800 support, the bias is now to the downside for the AUDUSD, with the next support below coming in around the 200-day moving average of 0.7650.
- Spot 1.2544
- USDCAD ended last week on higher note, with the pair reaching the 1.2600 handle briefly, its highest level since early-September.
- Helped by weaker crude oil prices and thus a weaker Canadian dollar, the currency pair continue to hold comfortably above the 1.2500 handle. The next resistance at 1.2778 is possible target over the next few weeks.
- Spot 6.6267
- USDCNH retreated back to its 50-day moving average Monday, after data showed China’s foreign exchange reserves rose for an eighth straight month in September.
- Strong resistance is expected to cap USDCNH around the region between 6.7000 (a strong psychological level) and 6.7165 (the 50% Fibonacci retracement level since January) this week.
- Spot 112.66
- The recent ascent of USDJPY looks to have hit a snag around the 113 handle. Further consolidation is expected for now.
- The next key resistance to be tested lies at the 6-month high of 114.48.
- Spot 1.3110
- The pound strengthened Monday after it was reported UK data may signal that the BOE might have to tighten policy faster than previously thought.
- GBPUSD regained above the 1.3100 handle after a report published in the Times newspaper said an error by the Office of National Statistics meant that second quarter labour costs were actually higher than previously stated.
- The psychological 1.3000 handle is likely to add support to the currency pair. Following a 3.9% decline over the past 3 weeks, GBPUSD looks poised for a bounce; the 1.3200 handle looks like a realistic target over the next 1-2 weeks.