Fed pivot?

Giles Coghlan LLB, Lth, MA Financial Source

Monday started with a risk-positive footing after the miss from the US ISM Manufacturing data. A miss across the board sent investors running to sell the USD, buy gold and silver (on USD weakness), and they also turned positive on stocks. Why? Bad data was seen as good news, since it meant the Fed may be less aggressive in hiking rates. At the time of writing the Non-Farm payroll will be eagerly anticipated. A miss there, with a headline below 200K, then investors will likely further anticipate a ‘Fed pivot’ and run ‘risk on’ again.

Other key events from the past week

Twitter: Musk Buys Twitter, Oct 05: Elon Musk has finally agreed to buy Twitter for $54.20 a share after months of wrangling and trying to avoid buying the company. Twitter says it intends to close the deal, so will we see gains for Twitter shares?

RBA: Hikes by 25bps, Oct 04: The RBA surprised markets with a 25 bps hike after Short Term Interest Rate Markets saw a 50% chance of a 50bps hike. The terminal rate expectations fell sharply lower post the meeting, so does that mean AUDNZD is selling ahead after the RBN kept a more hawkish stance?

USD: Mixed US ISM Data, Oct 03 & 05: The US ISM Manufacturing PMI was a miss, but the US Services PMI headline print showed strength. All focus is now on the NFP to see the chances of a Fed pivot! A big miss here and traders will likely turn ‘risk positive’ and buy stocks to end the week.

Key events for the coming week

USD: US inflation, Oct 13: Next week traders will be looking closely at the US core inflation print. If the core comes in below 6.2% y/y and the m/m below 0.4% then watch out for potential gains in gold and silver.

How will Twitter’s share prices react? Twitter has a seasonally weak period ahead.

USD: Retail sales, Oct 14: US retail sales will give markets a sense of how concerned the US consumer is feeling regarding coming interest rate hikes. They will also be looking at the US Michigan Consumer expectations on the same day. Register here for our free trading webinar to find out how to trade it.

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Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

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