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Geopolitical risks overshadow immense nonfarm payroll headline

Good morning


I try to steer away from writing too much about natural or man-made disasters, but there are times when it is necessary. I don’t care what your beliefs are, it is surely impossible to see events from Israel over the weekend without feeling horror and dread. I am well aware of the ongoing struggles in the region, and if I am truly honest I cannot claim to know the full history of how Israel came to be other than the area was carved up back in 1948 and since then there has been ongoing wars and skirmishes.


While neither side can be called innocent in the struggles, these latest attacks are appalling, the number of fatalities on both sides is just awful, men women and children all victims. Of all the horrific things on the news, one I found most disturbing was the reports of people in other countries, UK included, celebrating the attacks and loss of life. Despicable. I know its just a tiny handful of people and I shouldn’t let it bother me, but I fail to see how anyone can find pleasure in any of this.


I know there are two sides to every story and time is not necessarily a perfect healer. One of my favourite musicals has the following lyrics in a song. ‘A man’s called a traitor, or liberator; A rich man’s a thief or philanthropist; Is one a crusader, or ruthless invader; It’s all in which label is able to persist’. I’m not going to argue about the rights and wrongs of who lives where, but I will argue that I will never accept that the dreadful loss of life we have witnessed is something to celebrate regardless of which side of history you sit.


Back to the markets and a huge nonfarm payrolls headline Friday send the USD marching higher once again. With something around +170k forecast, the actual number was +336k, with the previous month revised up from +187k to +227k. EURUSD dropped to 1.0480, while GBPUSD reached a low of 1.2105. Perhaps the only thing that stopped the USD pushing on further was the unemployment rate staying the same at 3.8% when a drop had been expected, and a slightly softer average hourly earnings number. Having hit those lows both GBPUSD and EURUSD reversed, pushing back up to new highs at 1.2260 and 1.0600.


The attacks over the weekend and the subsequent concerns of a geopolitical nature then saw the USD open higher on safe-haven buying. As I type GBPUSD is 1.2180, EURUSD 1.0530, USDJPY has been surprisingly stable through all this, now 149.15. Those post-nonfarm lows in GBPUSD have highlighted the 1.2105 area as a level of support, having been tested Wednesday, Thursday and Friday last week, holding each time. Similarly 1.0480 was tested a couple of times and also held, well worth watching both. Given that much of the moves were in the US dollar, it isn’t a major surprise that GBPEUR is relatively unchanged, although at 1.1565 it is nearer the upper end of recent ranges and there is some focus on 1.1585, the late September highs.


Elsewhere, China were back after their holidays, USDCNY fixed at 7.1789, just a few points from its previous fix back at the end of September but still well below the levels traded in the market. Oil prices are higher on fears of contagion from the Israel attacks. WSJ are reporting Iran officials were key in the planning of the attacks. I had been thinking that tensions were perhaps easing between Iran and the US, but this is a major setback.


It was a good weekend for sports although it does feel odd celebrating with such unhappiness elsewhere. Spurs narrowly beat newly-promoted Luton to put them top of the table and it looked as though they would be alone until Arsenal scored a late winner in their match against Man City, leaving the two North London rivals jointly top of the table, the only sides in the Premier League to remain unbeaten.


In rugby, England will play Fiji in the quarter final of the world cup, Wales take on Argentina and Ireland face New Zealand in what could be a cracker. France v South Africa will be a real humdinger. France are just favourites for the tournament and as such just favourites to beat South Africa but I reckon it’ll be close. England may overcome Fiji but I don’t rate their chances against any of the other teams likely to make the semi-finals. Think we’re in for a treat next weekend. Before then, England will try to put their disappointing defeat to New Zealand behind them when they take on Bangladesh tomorrow in the cricket world cup.


The US are on holiday today and the calendar is very light with just a few central bank officials speaking. Attention obviously on Israel and the wider geopolitical risks in the region.



- 14.00 Feds Logan speaks

- 17.45 Feds Jefferson speaks

- 21.00 BoEs Mann speaks

- 00.01 UK BRC rate sales

- 00.30 AUD Westpac consumer confidence

- 00.50 Japan current account


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