United States: The vibe is alive

Wells Fargo Research Team Wells Fargo

Summary

United States: The vibe is alive

The U.S. economy continues to demonstrate exceptional strength. Nonfarm payrolls blew past expectations, rising 336K in September. The outturn was made all the more impressive by a net 119K upward revision to the past two months of data.
Next week: NFIB Small Business Optimism (Tue.), CPI (Thu.), Consumer Sentiment (Fri.)

International: Volatility hits global financial markets

Global financial markets remained under pressure for most of this week. The selloff in risk assets primarily stems from a still resilient U.S. economy and hawkish leaning Federal Reserve.
Next week: Brazil Inflation (Wed.), Russia Inflation (Wed.), Argentina Inflation (Thu.)

Interest rate watch: Long-term yields skyrocket

Expectations of heavy Treasury issuance in coming months appear to have contributed to the marked rise in yields on U.S. Treasury securities recently. Private sector borrowers will also feel the sting of higher borrowing costs.

Topic of the week: Speaker race commences as shutdown date looms

Last week, Congress and the president reached a last second agreement to avert a government shutdown that would have begun on October 1. The political landscape in Washington D.C. took another turn this week when former Speaker of the House, Kevin McCarthy, was ousted from his position by House Democrats and a small group of House Republicans.

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AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold consolidates below $4,300 amid hawkish Fed, higher bond yields, and bullish USD

Gold extends its consolidative price move, and languishes near the weekly low set the previous day amid a bearish fundamental backdrop. The US Dollar pauses for a breather following a strong rally to a nearly two-month high and offers some support to the commodity. However, the US Federal Reserve's hawkish outlook, elevated US bond yields, and persistent geopolitical uncertainties favor USD bulls.

Ripple, Cardano, Solana: ETF inflows and whale demand signal further rally

Ripple (XRP), Cardano (ADA), and Solana (SOL) continue to experience a steady recovery with double-digit gains so far this month. Ripple and Solana experience firm institutional demand, while the percentage of ADA supply in profit rises, underpinned by interest from large-wallet investors, commonly referred to as whales.

Treasury yields at 2007 highs

The combination of energy prices rising back above $100 a barrel, US PMI’s topping multi-year indexes and FOMC members taking tough tones when discussing future rate paths have all led Treasuries at both ends of the curve with higher yields. Treasury Notes account for close to 52% of all marketable Treasuries, so movements in yields are especially painful for the US fiscal outlook.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.