|

US shutdown continues, with NFP cancelled

  • European markets on the rise.
  • US shutdown continues, with NFP cancelled.
  • Oil prices rise ahead of OPEC meeting.

European equities have started the final session of the week on a firmer footing, with all major markets opening in positive territory. These gains come in spite of the somewhat concerning decline in PMI surveys, with downward revisions across French, German, and UK services sector metrics. Unfortunately, the UK’s struggles in driving down services sector inflation remains prevalent, with the PMI decline largely a result of weak new orders, output and employment, as prices remained elevated. Attention today will also turn to a packed schedule of central bank speakers, with members of the ECB, FOMC, and BoE all making appearances.

Across the Atlantic, the focus remains firmly on Washington, where the government shutdown moves into its third day. Markets seem to have taken this political impasse in their stride, showing little sign of stress despite the noise and uncertainty that has been playing out. Markets have clearly grown accustomed to short-term upheaval and uncertainty under Trump. The lack of market reaction highlights how little investors believe the shutdown will matter for the medium-term outlook on growth or interest rates. It appears to be a story of politics rather than economics, and for now participants are treating it as such. The risk, of course, lies in sentiment souring should the stalemate drag on, though so far the response has been one of quiet indifference.

Ordinarily, today would be dominated by the release of the monthly US employment report, with the recent breakdown in job growth pushing the Fed into a more dovish stance. However, what should be a day full of volatility has turned into a somewhat serene end to the ween, with traders instead taking their lead from the recent ADP payrolls decline. Today does bring the release of the latest ISM services PMI, with inflation from that sector in particular proving to be a key hurdle that been to be overcome.

Oil is trading firmer today, though this is more a case of traders unwinding their shorts ahead of the weekend with prices having dropped into a four-month low. Despite today’s gains, WTI still remains on course for its steepest weekly drop since June. The reason for many to reduce their exposure comes down to the weekend OPEC+ meeting that many expect will bring another output increase. There is speculation that the group could raise production by a hefty 500,000 barrels per day for November, marking a significant step up from October’s modest rise. With the resumption of Kurdish exports coming at a time of higher OPEC output, it is obvious to see why many are feeling emboldened around the bearish case for oil at the moment.

Author

Joshua Mahony MSTA

Joshua Mahony MSTA

Scope Markets

Joshua Mahony is Chief Markets Analyst at Scope Markets. Joshua has a particular focus on macro-economics and technical analysis, built up over his 11 years of experience as a market analyst across three brokers.

More from Joshua Mahony MSTA
Share:

Editor's Picks

GBP/USD holds above 1.3350 with the 200-day SMA capping gains

The British Pound appreciates against the US Dollar on Tuesday to trim previous losses and return to the 1.3375 area, aiming to retest resistance at the key 200-day Simple Moving Average. This is a popular indicator, which lies a few pips below 1.3400 and has been capping Pound’s recovery over the last two weeks.

EUR/USD consolidates gains above 1.1400

Following an earlier move to multi-day peaks past 1.1460, EUR/USD has now slipped back toward the low 1.1400s as the NA session draws to a close on Tuesday. Declining bets for potential Fed tightening later in the year coupled with poor US CPI data hurt the US Dollar, lending fresh legs to the pair and the broader risk-linked universe. Moving forward, the release of US PPI and Chair Warsh’s second testumony should keep investors entertained on Wednesday.

Gold battles to recover the $4,100 mark

Gold reverses the recent weakness and reclaims the area beyond the key $4,000 mark per troy ounce on Tuesday. The precious metal’s recovery picks up pace and approaches the $4,100 region following the Greenback’s decline and comments from the Fed’s Warsh.

Bitcoin, crypto market post gains following weaker US inflation reading
The crypto market posted gains on Tuesday following the release of the US Consumer Price Index (CPI) report for June, which showed that inflation cooled below market expectations. According to the US Bureau of Labor Statistics, annual inflation slowed to 3.5% in June from 4.2% in May, marking its first decline in five months and coming in below the consensus forecast of 3.8%.
Fed Chair Warsh reaffirms they will deliver price stability

While testifying on the Semiannual Monetary Policy Report before the US House Financial Services Committee, Fed Chairman Kevin Warsh reiterated that the Fed is making a commitment on price stability and the goal of 2% inflation.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.