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Markets:
- Gold down $10 to $2734
- US 10-year yields up 10 bps to 4.38%
- WTI crude oil up 20-cents to $69.46
- S&P 500 up 0.4%
- GBP leads, CHF lags
The crosscurrents in markets continued on Friday as we count down to the US election. It’s tough to separate moves based on economic data from election de-risking and election positioning. The tension is undoubtedly ramping up and betting odds shifted back towards Harris more-recently, adding a wrinkle.
The main event of the day was non-farm payrolls and the reading was just +12, far short of +113K expected and the US dollar immediately fell hard, 40 to 90 pips, with USD/JPY hit particularly hard. However all those US dollar declines were eventually erased.
Part of that was because the market wasn’t convinced that the jobs market is deteriorating, despite at -112K two-month net revision. The other factor was another rapid rise in Treasury yields, from a low of 4.22% post-data to 4.38% and a close on the highs. That move also helped to sap risk and weighed on commodity currencies and the euro.
It’s not entirely clear what’s driving the bond move but the pain in UK bond markets following the UK budget is topical, especially in scenarios where one party sweeps congress. But it could also be as simple as uncertainty and de-risking around a wide possible range of election outcomes. Finally, the prices paid component of the ISM manufacturing survey was hot, which may have ignited some inflation fears (though I find that a stretch).
Have a great weekend. Rest up because next week could be crazy.