Markets:

Gold up $19 to $3358
US 10-year yields up 3.6 bps to 4.28%
WTI crude oil up $1.95 to $67.40
S&P 500 up 0.5%
CAD leads, GBP lags

The US dollar firmed in European trading but gave it all back before the close. It started with some selling on a weak ADP employment number that raised worries about Thursday’s non-farm payrolls report. The selling continued after we finally got a second US trade deal, this time with Vietnam. Trump wrote about some of the terms but details were supposed to be released by now and we haven’t gotten them.

What we know so far indicates that will Trump will get his way on trade. This won’t be a ‘reciprocal’ deal at all and instead will allow for 20% US tariffs while Vietnam opens its market further. That shouldn’t be dollar negative on the surface but there is talk it could be a template and the market may be seeing that as problematic stance with larger US trading partners.

At the same time, the market was also watching for details on the US budget. A series of votes were expected today but they have been delayed so far as the fiscal hawks in the House make a last stand.

In any case, the risk trade improved notably and oil got an extra boost from a Dallas Fed survey showing plans to further drop US rigs. Equities started flat but finished solidly higher once again.

The other big intrigue in the market was in the UK gilt market. Yields jumped after the government dropped plans to impose some austerity into the welfare system and that was combined with some drama around Exchequer Reeves and resulted in some fiscal worries and a quick 130 pip drop in cable. It later recouped about half of that but it’s a story to keep a close eye on.

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