The near term dollar rally has been boosted again in the wake of Friday’s Nonfarm Payrolls report which roundly encouraged and drove a decisive reaction on bond markets. A yield curve “bear steepener” (where longer dated yields rise faster than shorter dated yields) tends to be dollar supportive and this reaction set the dollar back on its recovery path once more. The volatility on Wall Street with a sharp tech sector profit-taking muddies the water of the dollar, however, with Wall Street shut for Labor Day public holiday today, the trend of the near term dollar rebound is still intact. However, with bond markets also shut, there is a sense that this will be a muted session today. Despite this, the hard nose stance of both sides in the EU/UK post-Brexit trade negotiations is weighing on sterling this morning. The soft deadline of mid-October for any agreement means that both sides seem to be ramping up the rhetoric and sterling is caught in the crossfire. It could get messy for GBP in the coming weeks.
Wall Street closed lower on Friday but well off session lows as the S&P 500 closed –28 ticks (at 3426), with no futures today due to the Labor Day holiday. Asian markets were lower overnight (Nikkei -0.5% with European markets mildly higher in early moves. In forex there is a mild USD positive move, driven mostly with GBP weakness. In commodities gold is a shade lower.
It is a US public holiday for Labor Day today, so the economic calendar is pretty light. The Eurozone Sentix Investor Confidence at 0930BST is the only real data to be aware of, with consensus expecting a mild improvement to -10.8 in September (from -13.4 in August).