JASPER’S MARKET SQUAWK 06-10-2023

<h2>Fed Skip More Likely Due to Risen Yields</h2>
<p>Yields declined for a second session on Thursday as more Fed officials acknowledge that the recent rise in the 10-year Treasury eliminates the need for additional hikes, increasing the odds of a Fed skip in November.</p>
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<p><strong>Chart: EURUSD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>Fed’s Daly Links Bond Market Rout to Potential Rate Pause in November</li>
<li>EURUSD Climbs Despite Weighing Comments from ECB Speakers</li>
<li>UK Construction Falls Into Contraction, But Pound Gains Momentum</li>
<li>Saudi Arabia’s WTI Price Hike Ignored For Now, Could Create Contango</li>
</ul>
<h2>Bond Market Rout Equal to 25bps Hike, Says Fed’s Daly</h2>
<p>Fed’s Mary Daly (non-voter this year, but voter next) said that financial conditions from the tighter bond markets correlate to about 25bps in hikes and might eliminate the need for further increases this year. She emphasised the need for cooling the labour market and inflation, underscoring the importance of today’s jobs report. CME’s FedWatch tool is back to 80 from 70 earlier in the week, showing a Fed pause. Meanwhile, initial claims increased to 207k but came in lower than the 210k expected. The S&amp;P flattened completely out, opening up 4325 and 4250.</p>
<h2>Saudi Arabia’s WTI Price Hike Shrugged Off, For Now</h2>
<p>Oil prices continued to record losses due to uncertainty in the demand outlook and the market confronting restrictive policy before the NFP clears the picture. Investors are worried that peak demand is behind us, but where crude prices head will largely depend on how the recent price hike from Saudi Arabia for November creates a need for spot buying – i.e. contango. WTI slumped over 2% to $82.50 a barrel, with support at $80 and resistance no further than $85.</p>
<h2>EURUSD Up Despite ECB Speakers Weighing on Sentiment</h2>
<p>ECB’s Philip Lane (Ireland) said on Thursday that the bond market points to where the ECB wants to go: a gradual drop back to target inflation of 2%. He noted that lending has weakened more than expected. Luis de Guindos concurred that tighter financial conditions affect the manufacturing and, lately, service sectors. Euro zone borrowing costs fell on Thursday, with EURUSD 0.43% higher on the back of a softer greenback, eying $1.0595 next or back to the $1.05 support.</p>
<h2>UK Construction Falls Into Contraction, But Sterling Rises</h2>
<p>September’s reading of the S&amp;P Global/CIPS Construction PMI slipped into contraction from 80.8 to 45, below the 50 forecasted. House building declined, resulting in lower expectations for future business activity, and subcontractor availability increased fastest since July 2009. Driven mainly by weakness in the dollar, GBPUSD rose 0.50% to $1.2193, exposing $1.2272 next. On the flip side, support can be expected around $1.21.</p>
<h2>On The Docket</h2>
<ul>
<li>German Factory Orders</li>
<li>Halifax House Price Index</li>
<li>French Trade Balance</li>
<li>Nonfarm Payrolls</li>
<li>Fed Waller Speech</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi down by 0.22% and 0.20%</li>
<li>Euro 0.11% lower, Pound down 0.16%</li>
<li>Yen 0.22% in red, Swissy also down 0.19%</li>
<li>Canadian dollar seen at -0.15% as well</li>
<li>Gold up by 0.17%, Silver leads at +0.36%</li>
<li>Crude and Brent slightly up, at 0.15% and 0.08%</li>
<li>Natural gas futures 0.47% higher</li>
</ul>
<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-06-10-2023-26118/">JASPER’S MARKET SQUAWK 06-10-2023</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>