September 25: Overnight Market Wrap

September 25: Overnight Market Wrap

Key Points:

US stocks consolidate making minor gains

USD slightly weaker vs G10

US weekly jobless claims 870K vs 840K expected

Markets consolidated and retraced a little after the recent risk aversion into the close but endured some ups and downs during the session. All major indices closed slightly in the green for the day despite US jobless claims coming in at 870K still worse than expected but similar to last week. There was minimal response but the rally in the stock markets allowed some of the pressure off of the commodity currencies and for the greenback to weaken slightly. The RBNZ held rates yesterday aiding the NZD recovery and AUD stopped ahead of 0.7000 psychological level at 0.7016 before bouncing into the close around 0.7055. USD/CAD backed away from 1.34 to close around 1.3345 as WTI closed above $40. Gold also recovered from a dip below $1850 yesterday to close at $1869. For the rest of the majors both Cable and EUR made some gains on the day as did USD/JPY hold around the 105.50 level supported by the slight risk rally. Once again Powell reiterated the need for fiscal stimulus but the surprise of the night was Fed’s Bullard stating that the US economy could be back to full recovery by the end of the year which certainly raised some eyebrows. Must have had a hip flask on him! The UK announced a new jobs support scheme that gave Cable a lift and rumours of constructive talks with the EU also helped. Virus cases have spiked across Europe again with France announcing another 16000+ meaning it’s just a matter of time before stricter lockdown rules are imposed. EUR shrugged off this bad news and squeezed back to 1.1690 the key support on the way down. Only a close above here would indicate a possible end to the recent weakness but given the impact of the lockdown it’s unlikely that we see EUR strength take hold again. Further noise around Democrats demands for US fiscal stimulus and vaccine hopes continue to create headlines but it’s all speculative and has been largely ignored. We end the week with US durable goods data as the only data release of note with eyes on how risk closes out the week after its latest bounce.

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