Investors to seek safe-haven USD as Israel-Hamas conflict erupts

Daily Currency Update

The price of oil surged by more than 3% today, driven by increased uncertainty in financial markets due to the Israel-Hamas conflict. Additionally, the US dollar gained strength as risk appetite waned, prompting investors to seek refuge in safe-haven assets.

The US stock markets closed on a positive note last week as the most recent September Non-Farm jobs report revealed an unexpected addition of 336,000 jobs to the US economy. Furthermore, the August figures were revised upwards to 227,000. This surprising development led to a significant surge in long-term treasury yields, with the US 10-year and 30-year yields reaching their highest levels in 16 years.

Investors have been expecting the possibility of another interest rate increase and an extended period of higher rates. However, the current narrative suggests that a strong economy and a robust job market might enable businesses to achieve improved revenue and earnings growth. Consumers have demonstrated resilience in dealing with rising prices over the past few months, but the effects of recent pay settlements and earnings agreements have not yet been fully reflected in wage numbers. This situation could potentially necessitate the US central bank to raise rates by a larger margin than what may be currently anticipated by the market.