There seems to be no let up for the dollar as the trends of recent sessions continue to hold. This has become a story of renewed dollar weakness, with yields trending lower, gold strength and Wall Street breaking higher. The US COVID-19 infection rates may be showing signs of plateauing at least, but Congress is still unable to agree on a fiscal support package. Recent economic data announcements point to a deterioration once more in the labor market (employment components of both ISM Manufacturing and Non-Manufacturing, along with a miss on the ADP) suggest that we could see a negative surprise in the payrolls report tomorrow. Congress needs to deliver on fiscal support. Whilst the arguments continue, yields will remain under pressure and the dollar will slide. Gold is breaking ever higher into blue sky territory, but if Congress can deliver, then this would likely be a trigger for yields higher, a dollar rebound (albeit near term) and profit taking on gold. Early this morning, we have had the Bank of England announce monetary policy. No changes to its rates (at +0.10%) or asse purchases (at £745bn) which will run until around the “turn of the year”. The decisions were unanimous. What has moved sterling though is that whilst the study into negative interest rates continues, the indication is that the BoE has “other tools available” still. Sterling bulls seem to have taken this well.
Wall Street closed again decisively higher, with the S&P 500 +0.6% at 3327, whilst futures are again looking higher (E-mini S&Ps +0.1%). Asian markets were somewhat muted overnight (Nikkei -0.4%, Shanghai Composite +0.1%). European markets are also slightly cautious, with DAX futures -0.1% and FTSE futures -0.6%. In forex, there is still an edge of dollar selling pressure still on, with GBP outperforming after the BoE. In commodities, gold is another +0.5% higher and silver continues to smash higher by another +2%. Oil is also continuing to hold is break higher, by around half a percent today.