Daily Market Outlook, September 10th, 2021

Overnight Headlines

US stocks edged lower for the fourth session on Thursday even as initial jobless claims fell sharply last week. This came as the rapid spread of the Delta variant continues to cast a shadow over the supposedly strong US growth outlook. The US main benchmarks registered modest losses with the Dow and S&P 500 falling by 0.4% and 0.5% respectively while the tech-heavy NASDAQ ended 0.3% lower. European shares saw mixed performances after the ECB’s policy statement reflected a more optimistic outlook and a decision to slow its bond buying pace. Asian key markets closed on a mixed note too.

US treasury yields fell on the huge drop in initial jobless claims and after the Treasury Department’s auction of $24b 30Y notes attracted super strong demand. The benchmark 10Y UST yield was down by 4.1bps to 1.30% while the 30Y yield plunged nearly 6bps to 1.90%. Earlier, Atlanta Fed President Raphael Bostic said that the Fed could slow its bond buying pace this year even as softer economic data may delay the move.

The dollar slumped amid lower yields where the safe havens CHF and JPY were seen leading the gains. EUR was little changed after the ECB’s announcement.

UK GDP grew by just 0.1%m/m in July, which was a somewhat weaker-than-expected start to Q3. The consensus forecast was for a rise of 0.5%. Services output, covering most of the economy, was flat in July after the 1.5% rise in June, despite the reopening of some arts, entertainment and recreational industries. The main source of growth was industrial production, which gained 1.2%, although manufacturing output was unchanged. Construction output declined. This morning’s figures make it more difficult to achieve the Bank of England’s forecast of around 3%q/q growth for Q3 as a whole, and may partly be an indication of a more significant impact of supply constraints.

In the Eurozone, ECB President Lagarde is scheduled to speak at a press conference after the Eurogroup meeting in Slovenia. The ECB’s Villeroy and Elderson will also appear in separate events. Data wise, France, Spain and Italy will release July industrial production numbers.

In the US, the only notable data release is producer price inflation, while the Fed’s Mester speaks virtually at a Bank of Finland conference on monetary policy. No further Fed speakers are scheduled for next week ahead of the 21/22 September FOMC meeting.

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

USDJPY - 110.20 736m. 110.00/10 1.22bn (647m P). 109.80/90 515m.
EURUSD - 1.2000/10 718m. 1.1890/1.1900 718m. 1.1870/80 1.23bn (826m C). 1.1850 1.57bn (1.16bn C). 1.1800/20 1.59bn (965m P). 1.1770 460m. 1.1750/60 702m.
AUDUSD - 0.7470 989m. 0.7400 909m. 0.7350 737m.
USDCAD - 1.2690/1.2700 760m. 1.2660/70 450m. 1.2510 886m. 1.2460/70 466m. 1.2400 596m.
EURJPY - 130.00 535m.
USDCNH - 6.43 438m. 6.35 430m. - Source: CT News

EURUSD Bias: Bearish below 1.19 Bullish above

GBPUSD Bias: Bearish below 1.39 Bullish above.

USDJPY Bias: Bullish above 109 Bearish below

AUDUSD Bias: Bearish below 0.75 Bullish above