US Stocks Push Higher after Weaker Data – Dow up 0.8%

US stocks pushed higher in the latest session, extending their recent momentum as weaker-than-expected US jobs data strengthened expectations for an imminent Federal Reserve rate cut. The Dow led the gains, rising 0.86% to close at 47,882, while the S&P 500 added 0.30% to finish at 6,849. The Nasdaq advanced more modestly, up 0.17% at 23,454.

The softer ADP Non-Farm figures drove Treasury yields lower, with the 2-year slipping 2.4 basis points to 3.484% and the 10-year easing 2.7 basis points to 4.059%. The US dollar also weakened further, with the USD Index falling 0.46% to 98.87. Oil prices continued to move higher as faltering Russia–Ukraine peace talks kept geopolitical tensions elevated. Brent crude rose 0.56% to settle at $62.80, while WTI crude climbed 0.82% to $59.12. Gold traded in another rare tight range, slipping marginally by 0.05% to close at $4,204.13.

Pound in Focus for FX Markets

Sterling jumped into trader focus yesterday as the FX Gods aligned to see it drive higher against the dollar and on the crosses. Cable powered over 1% on the day with little respite in the move, and it was a similar story on the crosses with EUR/GBP losing 0.6% across all three trading sessions. There was no definitive driver of the move, but it does appear that a few different factors combined to see the outsized move occur. Most traders agree that the speculative side of the market was short, and stop-losses in Cable above 1.3270 and 1.3300 would have contributed to the move.

Services and Composite PMI data also came in stronger than expected, but not by a degree that you would normally expect to move the market by that degree. The weaker US ADP number would have contributed to the move in Cable, and this could have fed through to cross moves as well, but overall traders feel that the move may have been overdone given other moves in the majors. Now, traders will be watching the pound closely in coming sessions to see whether the move is justified or whether we see a bit of retracement back into recent ranges.

Quieter Day on the Economic Calendar Today

The macroeconomic calendar is quieter during the first two sessions of the day today, but attention will shift back to the US tonight with some more key labour-market indicators due. Investors will be watching Challenger job cuts data earlier in the session, which has sprung up in importance since the government shutdown; last time out, they came in at 173%, and anything higher is likely to back last night's ADP data miss and push rate-cut expectations up even further.

Later in the session, we have the release of the weekly unemployment claims, with expectations for a 219k print firmly priced in. Canada's Ivey PMI is also scheduled north of the border, with anything significantly off the expected 53.6 print likely to see volatility in the loonie.

Source: IC Markets