Daily Market Outlook, September 30th, 2021

Overnight Headlines

This morning’s Lloyds Business Barometer showed a 10 point increase in business confidence as the reading reached its highest since April 2017. Employment prospects rose to a four and a half year high, while expectations of higher wage growth broadened. The survey also asked some special questions about the current supply challenges facing businesses. These identified the biggest impediments as supply chain disruptions and shortages of raw materials or goods, followed by staffing issues. The readings were taken in the first half of September ahead of the most recent pressures on fuel supplies and prices.

With inflation concerns to the fore this week’s Eurozone inflation reports seem bound to command market attention. The September CPI data for the region is out early tomorrow but ahead of that updates for France, Germany and Italy will provide indications as to the likely outturn. All are expected to post further rises in annual inflation, which suggests that the Eurozone aggregate will rise further from last month’s decade high. The rise is primarily to do with higher energy prices and as is the case elsewhere is expected to be temporary. However, the increase will likely serve to intensify the debate at the European Central Bank at the appropriateness of its currently very loose policy stance. Eurozone unemployment data will also be released.

US Q2 GDP is a third reading which is not expected to be revised. More timely will be weekly US initial jobless claims. Despite backing up modestly over the last two weeks they remain close to the pandemic low recorded earlier this month suggesting that the labour market is continuing to improve.

Today sees more testimony to US Congress by Fed Chair Powell & Treasury Secretary Yellen. In Tuesday’s session testimony Powell once again suggested that asset purchase tapering was close but that the economic improvements required for an interest rate hike were much more stringent. Much of Tuesday’s discussion revolved around imminent fiscal deadlines with both Yellen and Powell urging Senators to act. However, it appears that a government shutdown has been avoided for now. Several other Fed policymakers are also scheduled to speak today.

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

USDJPY - 112.00 530m. 111.00 785m. 110.30/50 1.68bn (1.17bn C). 109.90/110.00 1.67bn (1.26bn C).
EURUSD - 1.1810/20 602m. 1.1790/1.1800 423m. 1.1760/70 655m. 1.1740/50 484m. 1.1690/1.1700 2.09bn (1.44bn P). 1.1650 794m. 1.1600/10 716m.
GBPUSD - 1.3640/50 1.16bn (1.11bn P). 1.3620 599m.
AUDUSD - 0.7340/50 814m. 0.7300/10 516m. 0.7200/10 746m.
USDCAD - 1.2850 435m. 1.2820 401m. 1.2790/1.2800 606m. 1.2740/50 2.26bn (1.54bn C). 1.2720 450m. 1.2700 585m. 1.2670 520m. 1.2550 972m.
USDCHF - 0.9150 890m.
EURCHF - 1.1000 425m. 1.0900 923m. 1.0850 614m. 1.0750 400m.
EURJPY - 130.40 483m. 126.50 420m.
EURSEK - 10.25 610m.
EURNOK - 10.26 640m.
USDMXN - 20.51 596m.
USDCNH - 6.44 691m.

EURUSD Bias: Bearish below 1.19 Bullish above

GBPUSD Bias: Bearish below 1.39 Bullish above.

USDJPY Bias: Bullish above 109 Bearish below

AUDUSD Bias: Bearish below 0.75 Bullish above