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"If the market was too confident about September tapering six weeks ago, it may be too confident about March tapering now," write the strategists at BAML, suggesting traders position themselves for a big payroll number on Friday - short 10-year Treasurys (TLT), long dollars (UUP), particularly vs. the yen (FXY), and long volatility (VXX).
"The balance of risks going into Friday is unusually asymmetric," writes the team, noting a weak number will be discounted as a temporary shock from the shutdown, but a strong print will have the market pricing in a December or January taper.
Boosted earlier in the week by a slow European inflation print, the dollar (UUP +0.6%) continues a nice run following a (barely) hawkish Fed Wednesday, and strong regional and national manufacturing data yesterday and today.
The biggest move has come against the euro (FXE), where ECB rate cut hopes arise after EU annual CPI came in at just 0.7% in October vs. consensus 1.1%. Core CPI of 0.8% fell from 1% previously. Pushing $1.40 and having the bears avoiding margin clerks one week ago, the euro now is buying just $1.3485.
The euro has risen above $1.38 for the first time since November 2011 and is +0.4% at $1.3817, with the dollar continuing to be dragged down by expectations that the Fed will delay tapering its QE program until next year.
Precious metals get their tails up following the disappointing September jobs number, with gold and silver moving from slightly in the red to higher by more than 1%. After falling to almost $1,250 per ounce last week, gold is back to $1,329. GLD +1%, SLV +1.5% premarket.
The dollar slips across the board. UUP -0.25% premarket. Up 0.4% vs, the dollar currently, the aussie (FXA) is particularly noteworthy. It suffered a brutal bear market this spring and summer, falling from $1.06 all the way to about $0.88 amid worries about a slowdown at home and in major customer China. It's been heading higher since around Labor Day, however, as the RBA signals a pause in its monetary easing campaign and as the growth outlook for China becomes less dour.
Maybe most interesting in wake of the debt deal is the action in the dollar and Treasurys - both of which signal the Fed taper is out of the picture for some time. Yesterday's Beige Book indicated slowing economic growth across 4 of 12 Fed districts.
Off another 5 basis points in morning action, the 10-year Treasury yield is down to 2.62% from 2.76% just ahead of the deal announcement yesterday. TLT +0.6%, TBT -1.3%.
The dollar (UUP, UDN) is getting hit across the board, with the euro (FXE), pound (FXB), yen (FXY), and swissie (FXF), aussie (FXA), and loonie (FXC) all posting significant gains. The Swiss franc is the strongest, up 1.1%.
S&P 500 (SPY +0.6%), DJIA (DIA +0.4%), and Nasdaq 100 (QQQ +0.6%) after the Fed surprises by not announcing any taper of its asset purchase program.
The 10-year Treasury note rises nearly a full point, the yield down to 2.78%. TLT +0.4%.
Precious metals soar, Gold (GLD +2.7%), Silver (SLV +2.9%), and the dollar (UUP -1%) heads south.
Money line from the FOMC statement: "The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases." Also noted is the "federal fiscal retrenchment."
The 10-year yield fell to as low as 2.70% overnight, but is currently 3 bps above yesterday afternoon at 2.74%. TLT -0.4% premarket.
Europe's off moderately and Asia fell inline with yesterday's decline in the U.S., but crude oil surged more than $3 per barrel to $112 before falling back to just above $109 at the moment.
The dollar (UUP) is stronger across the board, with the euro (FXE), cable (FXB), yen (FXY), swissie (FXF), and loonie (FXC) all off somewhere in the area of 0.5% against the greenback. As is typical of late, the aussie's (FXA) decline is somewhat higher, -0.8%.
Moving along with the precious metals over Syrian tension is crude oil, with both WTI crude (USO) and Brent (BNO) up more than 1.6%. WTI at $107.50 per barrel is threatening to take out levels last seen in the Spring of 2011.
The greenback is also catching a bid, moderately higher against the euro (FXE), cable (FXB), and the loonie (FXC), but sharply higher vs. the aussie (FXA). The dollar is losing a good bit of ground against the yen (FXY), and off just a bit vs. the Swiss franc (FXF).
Rising rates, the decline in stocks, and escalating violence in Egypt provided no bid for the greenback which fell across the board today.
The dollar (UUP -0.7%) lost more than 1% against the Swiss franc (FXF +1%) and nearly 1% vs. the yen (FXY +0.8%) and cable (FXB +0.9%). The euro (FXE +0.7%) gained nearly three quarters of one percent.
Typically the first to sell off when markets get a bit panicky, even the loonie (FXC +0.2%) and the aussie (FXA) picked up ground against the U.S. unit.
A reason? Maybe the commodity sector (DBC +1%) - it was notably strong with metals, energy, and the grains all higher.