Market Wrap – Greenback slide continues

The greenback has come under yet more pressure during the US trading session due to jobs opening data and a strong rise in oil prices due to news from OPEC.

The US dollar started to slide against the FX majors and other currencies after the August JOLTS job openings data showed the largest one-month decline on record.

Official data showed that openings fell to 10.05m from 11.17m in an early sign that the jobs market is slowing. The number of job openings in August of 2022 marked the lowest since June 2021 from a downwardly revised 11.2 million in July and a record level of 11.9 million in March. 

Meanwhile, 4.2 million Americans quit their jobs in August, little changed from the prior month, with the so-called quits rate unchanged at 2.7%. Also, the ratio of openings to unemployed persons declined with 1.7 jobs for every unemployed person in August, down from about 2 in July.

The US dollar also started to move higher after OPEC signalled that they were considering a 2 million per day output cut. Such news is generally bullish for oil price.

OPEC+ is meeting tomorrow and we may see a reverse in oil price at this point. Price started to move higher around a week ago with rumours of 500,000 barrels per day and it continues to climb.

There’s a strong signal that OPEC wants +$80 oil. They believe not enough money is being invested/made to supply the world; or they’ve had a taste of $100 oil and like it.

So far, the moves in the oil market are very strong, with both crude and Brent oil trading higher by around 4 percent intraday. Moves of this magnitude are quite rare.

Bloomberg is also reporting that Elon Musk has said to propose buying Twitter at $54.20 per share, the original price. The announcement has triggered a huge move in Twitters stock price.

Other big stories of the day include gold price making there move towards the $1,720 benchmark level and the British pound moving towards 1.1500, which would mark a 1,000-point increase in a week.

The ISM reading for the United States came in slightly weaker than expected, which prompted a move higher in the US dollar index and a move higher in the stocks at it could cause the Fed to consider that economic conditions are worsening.

Certainly, the number pointed to a slowing United States economy, however, the ISM number did not show a contraction. But it was however teetering very close to recessionary conditions.

Looking at the data, the ISM Manufacturing PMI fell to 50.9 in September of 2022, pointing to the slowest growth in factory activity since the contractions in 2020. It compares with 52.8 in August and market forecasts of 52.2.

New orders were 47.1 vs 51.3 in August and the employment unemployment index was at 48.7 vs 54.2 and contracted and production increased only slightly to 48.7 versus 54.2 expected.

Timothy R. Fiore, Chair of the ISM said “Following four straight months of panellists’ companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand. Many Business Survey Committee panellists’ companies are now managing head counts through hiring freezes and attrition to lower levels, with medium- and long-term demand more uncertain”.

The us economy also released the September Manufacturing PMI this afternoon, which was revised higher to 52.0 last month from a preliminary reading of 51.8, which was above 51.5 in August.

Still, the reading pointed to subdued operating conditions although output and new orders returned to growth. Nonetheless, firms expanded their workforce numbers at the fastest pace since March, although labour shortages continued to hamper firms’ ability to work through incoming new orders. Outstanding business rose again and at a quicker rate.

At the same time, cost pressures softened amid reports of lower prices for some inputs. Although slower than those seen earlier in the year, the rate of selling price inflation picked up slightly as firms continued to pass-through higher cost burdens to customers.

In terms of market moves sterling has been another big story today as the British currency storms higher by around 1.50 percent on the day as the US dollar index receded after the ISM release.

Big moves also took place in the UK bond market as 10-year gilt yields have popped to 3.98% from 3.91% after a Bank of England bond buyback operation highlighted some potential strains.

The Bank of England bought just £22.1 million in the operation while £1.89 billion was offered. That’s 86 x more and it may show there are still strains in the UK bond market. Earlier the UK Chancellor made amendments to his disastrous budget last week, which also eased UK market tensions.