It has been yet another day of modest financial price movements, as traders keep their powder dry ahead of Friday’s US employment report.
Another day, another record high for the S&P500. The index is on track to record its seventh consecutive daily increase and is up for 15 of the past 18 days. Most of those price increases have been fairly modest in the current low vol environment. Making money has never been so boring.
Equities remain well supported against a backdrop of stronger global economic data. Final PMI data in Europe were in line with the flash estimates, showing the euro-area economy travelling well. Earlier in the week the US ISM manufacturing index rise to a 13-year high. Overnight, the non-manufacturing version of the index was released, blasting through expectations and leaping to its highest level in 12-years. It looks like the impact of the hurricanes had some impact, but it also looks like the index reflected fundamental support for US growth as well.
The data only had a passing impact on the currency market, with trading flows reported to be light, ahead of Friday’s US employment report. ADP private-sector employment was in line, with the below-trend 135k increase impacted by the hurricanes.
The NZD is pretty much at the same level as it was this time yesterday, around 0.7160. We saw broadly-based USD weakness during the local trading session as the market seemed to hook onto a report that Trump was close to making a final decision on the next Fed Chair. Trump’s advisers were said to have given him a final list of people they’re recommending as candidates and speculation is that it is largely a two-horse race between Warsh, seen as on the hawkish side, and current Fed Board Governor Powell, who is more aligned with Yellen. With Warsh having more critics, it seems that Powell would be the easier choice to make, satisfying the desire to have someone like Yellen on the hawk-dove spectrum, but more willing to relax financial regulations. After reaching as high as 0.72 yesterday afternoon, those gains have been gradually whittled away.
The NZD is fairly flat on most of the currencies, compared to this time yesterday. The AUD has slightly outperformed, which sees NZD/AUD down slightly at 0.9120.
The EUR doesn’t seem to have been impacted by Spanish politics over the past 24 hours. Catalan President Puigdemont is scheduled to make a televised address this morning and has said he expects to declare independence within days following Sunday’s unofficial referendum. EUR is fairly flat around 1.1760 and NZD/EUR sits around 0.6090. German bonds have seen some European safe-haven flows as investors have bailed out of Spanish bonds. Germany’s 10-year rate got down to 0.415%, before reversing course to 0.45%.
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