US stocks rallied on Thursday and in the futures market as investors cheered the deal made between Republicans and Democrats. The two parties agreed to have a stop-gap deal that will see the country avoid a debt crisis in the near term. Republicans expect that Democrats will spend the next three months coming up with a reconciliation bill. Mitch McConnel has insisted Democrats should raise the debt ceiling themselves. Besides, they are the ones implementing a $3.5 trillion anti-poverty bill. Economists believe that a default of the US government would have a major impact on the American economy. The Dow Jones rose by 465 points while the S&P 500 and Nasdaq 100 rose by more than 1.5%.
The British pound rose in the overnight session after the Bank of England (BOE) chief economist hinted that the bank would start hiking interest rates sooner than expected. The bank, which is set to meet in November, is considering tightening because of the rising cost of living. In its decision in September, the bank said that it expects the inflation rate will rise to 4% in the near term. However, the rising energy costs have made many analysts believe that inflation will rise to as high as 6%. Data published on Thursday showed that home prices continued to rise.
The key catalysts for the financial market today will be the latest American and Canadian jobs data. Economists expect the data to show that the American economy added more than 500k jobs in September as the labour market continued to tighten. They also see wages rising by 4.6% and the unemployment rate falling to 5.1%. Meanwhile, Canada, added more than 65k jobs in September as the unemployment rate fell to 6.9%. The other key events will be the Reserve Bank of India (RBI) interest rate decision and German trade data.
EURUSD
The EURUSD pair was little changed ahead of the latest American jobs data. The pair is trading at 1.1555, which is a few points below this week’s low. The pair is also along the middle line of the Bollinger Bands. It has formed a bearish flag pattern and is below the Ichimoku cloud. Therefore, the pair will likely break out lower after the NFP data.
USDCAD
The USDCAD price declined to a low of 1.2550 as crude oil prices rose and as the market waited for the latest jobs data. The pair also managed to move below the key support level at 1.2560. The pair’s bearish trend is being supported by the 25-day and 50-day moving averages and oscillators like MACD and RSI. Therefore, the pair will likely keep falling with the next key support level being at 1.2500.
GBPUSD
The GBPUSD pair rose as investors priced in tightening by the Bank of England. It rose to a high of 1.3642, which was the highest level since September 27. It has also formed an inverted head and shoulders pattern and moved above the 25-day and 50-day moving averages. Therefore, the pair will likely keep rising as bulls target the next key resistance at 1.3700.
