Stimulus Promise, US Data Heavy, Brexit Progress, Oil Stable, Gold Pushing $2,000
It's been a very US-centric week so far and that's unlikely to change, with stimulus talks continuing and Friday's jobs report being of great interest.
It's the former that's getting investors excited over the last 24 hours, with the Democrats and Republicans seemingly edging gradually closer to a deal. The talks have moved at a snails pace and there's still a significant difference between the packages the two are proposing, but they are heading in the right direction.
The decision to delay a vote in the House on the Democrat proposal, in favour of another day of negotiations with Treasury Secretary Steve Mnuchin is promising. Whether it actually yields anything is another thing but there's more optimism around a pre-election stimulus package than there was a week ago and that's obviously great news for investors.
The recovery has far exceeded expectations in the US but there's still a long way to go and a failure to agree a stimulus package will be hugely detrimental to the economy. A poor jobs report may force Congress to compromise, under pressure from the White House, with a self-imposed stalled recovery being the last thing Trump needs going into election day.
Prior to tomorrow's jobs report, there's no shortage of high impact economic releases, with inflation, income, spending, jobless claims and PMI figures all due out today. The spending figures are arguably the most important as we look for signs of a stalling economy and with forecasts anticipating only a 0.7% increase, that will be a worry for lawmakers on Capitol Hill.
Big step forward in Brexit talks overshadows earlier pessimism
It's been a rollercoaster day for the pound, with earlier pessimism after the EU initiated legal proceedings against the UK over the Internal Market Bill. While expected, the move was viewed as a negative in a week that has reportedly not been as productive as hoped, with the middle of October deadline only a couple of weeks away.
The currency did a 180 shortly after midday though following an FT report that a landing zone on state aid has been identified, leaving only fishing rights as the remaining contentious issue. That's a massive step forward and takes us ever closer to a less chaotic Brexit in a few months time.
Oil stuck between gloomy outlook and Saudi put
Oil is once again struggling to gain any upside traction, with yesterday's rebound quickly running out of steam. Brent and WTI are both more than 1% lower today, even against the backdrop of a softer dollar and improved sentiment. There doesn't appear to be any urgency to move in either direction, with $40 seemingly the sweet spot for now. The gloomy outlook is facing the opposing force of the Saudi put. The Energy Minister's warning for shorters recently could provide support for prices and buy time for producers, as the global economy heads into a challenging winter.
Gold stuck at $1,900 but a break isn't necessarily the end of the correction
Gold is edging higher again today but facing stiff resistance around $1,900 for the second time this week. There's a persistance about this rally that may be anough to see it through this major psychological barrier but I'm not sure if will be enough to cast doubters aside. The dollar is similarly coming off its highs, after rebounding strongly since early September, but there's still some room for manoeuvre below before the correction is declared complete. The key level in the dollar index is around 93 so there's still some space below. 93.50 is also interesting, which coincides with $1,900 in gold, but it's no game changer.