Dow Hits Fresh Record as Markets Remain Focused on Middle East
US equity markets delivered a mixed performance overnight, with the Dow Jones continuing to push higher and closing at a fresh record high as optimism around a potential peace deal in the Middle East returned. The Dow gained 0.49% to finish at 54,349, while the S&P 500 slipped 0.17% to close at 7,723, and the technology-heavy Nasdaq underperformed, falling 0.83% to 26,363.
The US Dollar came under some pressure against the major currencies, with the US Dollar Index falling 0.18% to 99.68. Treasury yields were relatively subdued after their recent declines, with the 2-year yield easing 1.1 basis points to 4.181%, while the benchmark 10-year yield was unchanged at 4.613%.
Oil prices stabilised following the heavy selling seen over the previous few sessions as traders continued to monitor developments in the Gulf and assess the potential impact of any progress towards a diplomatic resolution. Brent crude edged 0.13% higher to US$79.46 a barrel, while WTI slipped 0.73% to US$75.22.
Gold was the standout mover overnight, surging 4.16% to US$4,245.40 an ounce. The sharp rally pushed the precious metal to its highest levels since mid-June, with the weaker US Dollar, softer Treasury yields, and continued geopolitical uncertainty all helping to drive renewed demand for the traditional safe-haven asset.
Dollar Remains in Focus for FX Traders into Jobs Data
The US dollar could be gearing up for another strong move higher, with tomorrow’s US jobs report potentially providing the next major catalyst for the greenback. The key driver is the resilience of the US economy. If the employment market continues to show strength, traders could quickly start pricing in expectations for Federal Reserve rate hikes sooner rather than later, particularly with inflationary pressures still elevated. A strong payrolls number would therefore be a clear positive for the dollar, with higher US Treasury yields likely to add further support. There will be a major focus on UsdJpy in particular over the number after strong intervention in the market last week by both the Bank of Japan and the Fed. A higher Non-Farms print would likely test the resolve of the central banks again, which could turn the final trading session of the week into a very volatile affair if they feel compelled to enter the market again, while a weaker print would be preferred by both, likely pushing the pair lower and testing recent lows.
Rangebound Trading Conditions Today Ahead of Non-Farms
It is a very quiet session ahead from a scheduled data perspective, with only the weekly US unemployment claims figures (exp. 203k) due during the New York session. With little in the way of major economic data to drive markets, traders are likely to remain focused on the latest headlines out of the Middle East, with any fresh developments around the potential peace agreement likely to dictate sentiment across equities, currencies, and commodities. Traders will also be very aware of the big US employment data coming out tomorrow; therefore, we could see quieter, rangebound conditions if all is quiet on the geopolitical front.
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