Overview

Even with the move higher on US bond yields, there is a positive sentiment across major markets that are coming with USD weakening. Flash PMIs are expected to continue to fall away so it will be interesting to see if this sentiment can continue.

Today’s news

  • Main drivers: Mixed to mild positive sentiment; Wall Street hits highs; Japanese inflation in-line with forecasts; UK Retail Sales miss; Putin talks about oil supplies; Fed’s Powell before the blackout; Flash PMIs across Eurozone, UK and US later.
  • Mixed to mildly positive sentiment: Despite bond yields moving ever higher, yesterday’s rebound for the USD has not followed through today. There is a continuation of positive moves across equities.
  • Wall Street back at the highs: Cash indices hit all-time highs for S&P 500 and the Dow yesterday. However, an after-hours earnings disappointment for Snap has hit tech shares and are weighing on futures early today. [Marginally risk negative]
  • Japan inflation in line: core CPI rises to +0.1% which is the highest since March 2020 but was in line with expectations [no JPY reaction]
  • UK Retail Sales miss: Both headline and core sales miss estimates in September [Marginally GBP negative]
  • Putin talks about oil supplies: Russia could raise oil output and increase gas supply into Europe [Mild negative for oil price]
  • Fed speakers talk taper and interest rates: FOMC’s Williams (permanent voter, dovish) was fairly relaxed on inflation; FOMC’s Bostic (2021 voter, hawk) noted that rate hikes could begin late Q3 2022/early Q4 2022 [Broadly as expected]
  • Central bank speakers: Last day of Fed speakers before the “Blackout Period” begins.

FOMC’s Daly (2021 voter, mild dove) speaks at 1300GMT

FOMC Chair Powell (permanent voter, mild dove) speaks at 1400GMT

Economic Data:

  • Eurozone Flash PMIs at 0800GMT are expected to fall slightly on the Composite back to 55.2 in October (from 56.2 in September)
  • UK Flash PMIs at 0830GMT are expected to slip slightly with the Composite back to 54.0 in October (from 54.9 in September)
  • US Flash PMIs at 1345GMT the Composite PMI is forecast to move slightly lower to 54.7 (from 55.0) with services mildly higher but manufacturing slightly lower.

Markets Outlook

  • Broad outlook: A slightly cautious handover from the Asian session has begun to turn more positive as the European session has taken hold. Equities higher and USD sliding lower again.
  • Forex: Another USD rebound seems to be another chance to sell as the Dollar Index falls back under 93.70 again today.

   EUR/USD again finding buyers in the 1.1610/1.1625 support area. The recovery trend is being tested, but the bulls will be eyeing a test of 1.1665/1.1670. A breakout opens 1.1755.

   GBP/USD the rally is just stuttering around 1.3835 resistance. Weak Retail Sales not helping GBP today, but USD underperformance is supportive for the pair. Above 1.3835 opens 1.39/1.40. Support building 1.3730/1.3770.

    AUD/USD good support formed around the uptrend and a move back above 0.7475 is encouraging for further gains to retest yesterday’s high of 0.7545. Buying into weakness.

  • Commodities: Renewed weakening of US is helping metals higher.

   Gold we are neutral between $1760/$1800 but there is a slight positive bias within the medium term range forming now. The rebound is now eyeing the resistance at $1800. Above $1810 opens $1834 (the range highs). Support at $1745/$1760 is key near term.

   Silver rally is again picking up off breakout support around $24.00. Recovery momentum looks strongly set up to continue the rally.

   Brent Crude oil consolidation under resistance at $86.35 is threatening the strong uptrend. The price is slightly lower again today, but support around $83.55 is holding. We are cautious whilst this phase plays out.

  • Indices: Wall Street hitting all-time highs yesterday is helping sentiment today, even if US futures are back from their peaks into the European session.

   S&P 500 futures gaining once more, with upside potential on RSI there is room for a decisive push into new highs. We remain buyers into any weakness with support around 4470 key.

    DAX ticking higher today but still within the recent phase of consolidation. Buyers are still interested between 15,400/15,450, but resistance at 15,600 is proving stubborn.

    FTSE 100 still consolidating under resistance at 7246. Support around 7150/7200 is holding and maintains a positive outlook. The bulls are still looking for a breakout above 7246.