Likely to be a quiet one ahead of tomorrows nonfarms

Good morning

Talks with Iran over the Strait of Hormuz seem to be ongoing and the lack of military attacks from both sides has led us to this period of improved risk sentiment.  Oil prices remain near the lows of recent ranges, heading towards the levels we saw in July before US reinstated the Iran port blockade and both US and Iran traded shots.  Iran and Oman are also reported to be close to a deal on management of the Strait of Hormuz, we await confirmation of any such agreement.

Equities remain firm although Asian markets overnight did lose a bit of ground.   The US dollar had a brief spell of weakness yesterday which saw GBPUSD trade up to 1.3485 and EURUSD to 1.1560, but as I type we are 2-025 pips off those levels which puts us pretty much exactly where we were this time yesterday.  Comments from Feds Kashkari that now is the time to start raising rates, in line with other more hawkish Fed commentary, offered little in the way of support for USD.

Aussie trade balance showed a surplus of AUD1.9bn overnight, reversing last months deficit which itself was revised to a smaller loss.  AUD hasn’t really reacted, with AUDNZD just a few points below 1.2000 and GBPAUD 1.9120, pretty much unchanged from this time yesterday after seeing a dip overnight to the 1.9065 area before the trade data was released.

USDJPY has traded between 157.20 and 157.95 for the last couple of days now, very much calmer after the intervention we saw last week and possibly earlier this week.  It is currently near the top of that range at 157.85.  Intervention tends to have a temporary effect and with BoJ rates still well below Fed rates I would not be at all surprised to see JPY weaken steadily.  Still, the threat of further intervention and potential BoJ rate rises could be enough to slow any yen depreciation, indeed I have seen a couple of major banks lowering their year-end yen targets for below 150. 

The SpaceX rocket did crash into the moon yesterday but so far we are still waiting for pictures and videos.  Not quite sure why they take so long, I’d have thought someone would have a video of the event.  I’ve seen a couple of videos on the internet but as with anything these days it is more likely to be produced by AI than anything reality-based.   It is getting more and more difficult to know what to believe these days. 

EU retail sales probably today’s highlight although it’s rarely market-moving.  Second tier US jobs data on the calendar but we await the main event, nonfarm payrolls tomorrow.  Not sure how that is going to play out, I’m tempted to look at an overnight strangle just in case we see some volatility, perhaps 1.34-1.35 strikes which is likely to cost 20-25 usd pips.  I can see it being a bit quiet today so no rush to get it on, could get a few pips cheaper into the afternoon.

Have a great day…

-  09.00 ECB economic bulletin

-  10.00 EU retail sales

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  22.30 Feds Musalem speaks

-  04.00 China trade balance