Waiting for the non-farm payrolls announcement

The US Treasury secretary, Steven Mnuchin, has written to congress to ask for the debt limit to be raised. He stated the Treasury will needed to start taking ‘extraordinary measures’ to prevent the US from defaulting on its obligations. Currently, the US debt to GDP ratio is standing at 104% - it has recently been higher.

IG Analyst

Publication date : 2017-03-09T21:42:27+0000

Source: Bloomberg

For the history buffs, it was 120% in the late 1940’s under the weight of war bonds. The remedy at the time was letting inflation run up to 18%.

Currently on a global basis, inflation is running at 2% - in the US it’s currently at 2.5%.

The cost of oil and associated gasoline products are underlying contributors to the inflation rate, with oil falling below the key $50bl level overnight for the first time since 7 December 2016. This inflation figure looks to be in check for now.

USD strength has again waned overnight, with the dollar basket easing back to 101.88. At the same time, the commodities complex also moved to consolidate some recent falls. There seems to be a risk of sentiment moving through the markets, as traders wait to see the change in the non-farm payrolls due at 12.30am AEDT. The forecasted figure is an additional 200K; any number above this may spur the markets to move higher. This is a sign showing us that President Trump has put the US economy on a path of exponential growth.

The President of the European Central Bank, Mario Draghi, left rates unchanged overnight. He stated that asset purchases will reduce to €60 billion from April 2017 until December 2017. His commentary focused on increasing confidence, stating that that the ongoing economic expansion will continue.

The EUR/USD moved back over 1.06. It has clearly found support in the past two-weeks above the 1.05 level. This is a sign of strength and that the parity party for the euro may be on hold for now.

In the commodities complex, copper traded at $2.57lb, which is well under the key $2.70 level of the past weeks. A potential 200,000 tonne shortage of copper concentrate would put the price of copper on notice with traders. If this shortage firms up, the price of copper would be set for a move higher, with some estimates suggesting $3.00lb.

Gold stocks may see some support today. Even though the gold price fell to a low of $1201 overnight, down nearly 5% over the past 10 trading sessions, the AUD price still remains above the key $1600oz level. This may be short lived, as the gold price resumes its primary down trend from the July 2016 highs of $1375.

In our Aussie 200 market, a mixed open is expected with the ADR’s showing BHP at $23.61, which is down from yesterdays close of $23.96. The ADR for FMG is flat at $6.27. Financials still remain bid, with CBA’s ADR higher at $84.01 - up from yesterday’s close of $83.53.

Three Australian banks (ANZ, NAB, WBC) are pushing over recent 60-day highs, with CBA recently ex-dividend close by.

The Australian 10Y shows a yield of 2.91% and remains in breakout territory, another potential rate cut from the Reserve Bank of Australia (RBA) seems at odds with the forward curve. A resurgence in the S&P coming into the close and the Aussie SPI futures have now turned positive by 10 points; this could bring in a surprisingly positive day.

Waiting for the non-farm payrolls announcement

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