Dollar Might Struggle to Keep Rising Unless Jobs Data Are Very Strong — Market Talk

1041 GMT - The dollar is unlikely to maintain its recent strong momentum unless Friday's U.S. nonfarm payrolls report is much better than expected, ING's Francesco Pesole says in a note. "While it might be too early for a break lower in oil prices, news of the U.S. and Iran working on a deal regarding the Strait of Hormuz could prevent another jump higher." That could stabilize government bonds and risk sentiment, he says. Moreover, the dollar looks expensive, according to ING's short-term valuation models. The DXY dollar index rises 0.1% to 101.101 but a pullback to 100.50 would be more coherent with fundamentals, he says. ING expects this week's jobs data to leave markets guessing about another U.S. interest-rate increase in October. ([email protected])1037 GMT - Tokenization, which creates digital units of value on a blockchain to represent ownership of an asset, offers operational efficiencies but also faces some limiting factors, HSBC digital asset analysts say in a note. This only makes sense if it brings demonstrable advantages over the current way of issue, trading and redeeming assets, they say. The benefits of tokenization include faster settlement times, 24/7 trading, less reconciliation, greater programmability, lower minimum investment sizes and potentially wider and more continuous market access, they say. Challenges include risks related to the technology underpinning tokenization, legal enforceability and limited secondary market liquidity, they say. "For now, tokenization therefore must coexist with much of the legacy financial infrastructure it ultimately seeks to improve." ([email protected])1031 GMT - Cryptocurrencies are falling as investors back a stronger dollar ahead of an increasingly likely Federal Reserve rate hike next month, IG's Chris Beauchamp writes. A rally across crypto assets early last week stalled as investors bet on the greenback, with "a stronger dollar carrying almost all before it," the market analyst writes. Markets now price a 70.3% likelihood of a quarter-point Fed rate hike in October. U.S. jobs data Friday will likely reinforce expectations of rate hikes, further weighing on nonyielding assets, Beauchamp says. Bitcoin falls 2% to $82,827.11, while ether drops 1.5% to $2,646.93. ([email protected])1026 GMT - The dollar could remain firm in the near term but the longer-term outlook is becoming less favorable for the currency, Societe Generale's Kit Juckes says in a note. Elevated oil prices, robust U.S. economic data and a more risk-averse global environment support the dollar, he says. Further out, November's midterm elections make it difficult for President Trump to maintain accommodative fiscal policies that have supported the economy and the dollar, he says. "The world's major savings economies are saving less than they once did, while the U.S. is having to pay more to attract the investment it needs." The DXY dollar index rises 0.1% to 101.101. ([email protected])1017 GMT - The cost of insuring high-yield euro credit against default rises to its highest in more than five months as market sentiment weakens due to renewed U.S.-Iran tensions. President Trump rejected Iran's plan to reopen the Strait of Hormuz, raising concerns about prolonged oil supply disruptions. Brent crude rises 3.7% to $108.18 a barrel. The iTraxx Europe Crossover index of euro high-yield credit default swaps rises 1 basis point to 298bps, the highest since April 8, S&P Global Market Intelligence data show. ([email protected])0944 GMT - The diplomatic treatment of the Trump-Xi meeting signals near-term stability, BofA Securities says. The bank noted that President Trump offered "notably warm" treatment of China's Xi Jinping, personally receiving the Chinese leader planeside upon his arrival for a state visit. China also announced the loan of two giant pandas to Zoo Atlanta. "It is consistent with our prediction that panda diplomacy will be an easy win, when disagreements in trade and investment negotiations are hard to overcome," BofA writes in a research note. This provides an "important stabilizing channel" as trade talks continue, it adds. ([email protected])0909 GMT - Morgan Stanley upgrades its view on French government bonds in light of their recent yield rise, switching to a neutral position in the expectation that yields are unlikely to increase much more. "We turn neutral on France and do not chase further underperformance as valuations look cheap across different metrics," the rates strategist says. The 10-year French OAT-German Bund yield spread is currently at 110 basis points, close to the 114 basis points it reached last week, the widest since 2012. ([email protected])0903 GMT - The U.K. government's new Help to Buy program could boost new-home sales in England by more than 15% over the next two years, Jefferies analysts say in a note. The country's new-home market has been one of Europe's weakest over the past 12 months, but the "Your First Home" plan could significantly reverse that trend, Jefferies says. MJ Gleeson and Persimmon are each up 15%, while Barratt Redrow and Taylor Wimpey are each up 14%. ([email protected])0843 GMT - Singapore's manufacturing output is likely to grow unevenly as strong demand for artificial-intelligence hardware supports some segments while rising costs and supply disruptions weigh on others, DBS senior economist Chua Han Teng says in a note. Factory output rose 15.4% on year in August, accelerating from July's revised 6.9% expansion, largely on AI-related demand. Petrochemical firms, meanwhile, face a shortage of feedstock due to the closure of the Strait of Hormuz, he adds.([email protected])0837 GMT - The Polish zloty's recent underperformance looks justified as Poland contends with security risks, political frictions and a central bank that is potentially behind the curve in raising interest rates, Commerzbank's Tatha Ghose says in a note. Poland Prime Minister Donald Tusk has warned Russia could launch attacks against Poland while President Karol Nawrocki could block a windfall tax bill on fuel companies which would be help lower prices. Polish inflation has accelerated the most month-on-month among peers over the past quarter and the central bank is slow to accept this, Ghose says. The euro rises 0.2% to 4.3770 zloty, having reached 4.4004 Thursday, its highest level since January 2024, according to LSEG. ([email protected])0831 GMT - Credit valuations and equity prices could face pressure under an environment of higher interest rates, Tickmill Group's Patrick Munnelly says in a note. Middle East tensions and the accelerating oil prices are causing markets to expect three or more interest-rate increases by each of the major central banks over the coming year, LSEG data show. "If energy prices remain elevated, central banks have less room to ease and more reason to keep inflation risks front and centre." Brent crude climbs 2.7% to $107.14 a barrel. ([email protected])0816 GMT - The Trump-Xi summit's two-month trade truce extension is a "main disappointment" of the meeting, BofA Securities says in a research note. The outcome, which falls short of BofA's expectation of a one-year extension, "appears more closely aligned with the U.S. position," the bank says. China didn't specify the duration of the extended timeframe in its official statement, it notes. The extended truce would allow the U.S. to assess China's implementation of the existing agreement, particularly on rare-earth supplies, BofA says. Additionally, the two sides may simply need more time to negotiate. Potential top-level negotiations at the APEC meeting in Shenzhen and the G-20 summit in Miami offer opportunities for the countries to reach a deal before the year-end, BofA adds. ([email protected])