Precious Metal Hits Record $3,896; USD Slides on Fed Outlook

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3840-1.4090

Euro                 1.6270-1.6520

Sterling            1.8660-1.8910

WTI Oil (opening level) $60.85

The CAD/USD is opening at 1.3967 ( 0.7159 )

Gold touched a new all-time peak of 3896, though it lacks follow-through buying amid the upbeat market mood. USD struggles from a one-week low amid the growing acceptance that the US Federal Reserve will lower borrowing costs two more times this year. This, along with persistent geopolitical tensions, continues to act as a tailwind for the precious metal. If 3900 is broken then the obvious target of 4000 is well within sight.

Headlines

·    Entering its second day, the government shutdown prompted Trump to threaten widespread federal job cuts measuring in their thousands to pressure Democrats. The closure also led to a data blackout, delaying the Labor Department's scheduled release of September's nonfarm payrolls.

·    The Bank of Japan’s Governor Ueda was out with cautious rhetoric on the likelihood of an imminent rate hike, saying that the delay of the release of US data is a “severe problem” and that there is still “large” uncertainty on the impact of US tariffs, but that it may be too late to wait for all data, including the degree to which food inflation will continue to slow. Clearly, he is unwilling to pre-commit to a rate hike at the October meeting.

·    US employers announced plans to cut 54,064 jobs in September, the lowest in three months and down almost 26% from a year ago but bringing the total for the year to 946.426 cuts, the highest since 2020, with reductions most notable in government. Those planning to add jobs reached 117,313 in September, down 71% YoY, making it the weakest month for hiring since 2011.

·    Euro Area unemployment rate rose to 6.3% from July's 6.2%, against expectations for stability. The jobless count increased by 11,000 to 10.842 million. Youth unemployment held at 14%, and Spain, France, and Italy had the highest rates, while Germany and the Netherlands had the lowest. A year ago, the rate was also 6.3%. The EU unemployment rate was 5.9%.

·    The temporary US government shutdown will halt Friday’s scheduled release of the CFTC’s closely watched Commitment of Traders Report (COT), covering futures positions held across forex, commodities, fixed income and stock indices. During the 35-day shutdown from 22 December 2018 to 25 January 2019, the flow of positioning data was severely disrupted, with the COT report only catching up by 8 March that year. Depending on the duration of the current shutdown, managed money and other speculative accounts may again operate under the radar for an extended period.

Key Points

·    Equities: New highs for the US indices, but markets close off session highs.

·    Volatility: Slightly elevated and posting highest close in a week despite strong risk sentiment.

·    Digital Assets: Another surge overnight but partially unwound in the case of Ethereum

·    Currencies: USD choppy to firm, especially versus weak JPY after BoJ’s Ueda cautious on rate hike timing

·    Commodities: Gold eyes resistance at USD 3900. Steep losses in crude ahead of OPEC+ meeting

·    Fixed Income: US treasury yields steady amidst lack of US data – though ISM Services up today