Outlook: The critical data this morning is the ADP forecast of private sector jobs growth, estimated to be a gain of 430,000. This is a preview of payrolls on Friday. ADP gets it wrong nearly all the time but is still the closest to the actual. Leave it to the FX market to home in on the one unforecastable indicator to drive the market. See the chart from Trading Economics.

The markets are in a state of utter confusion about whether it is risk averse or risk-embracing. The bellwether Swiss franc, which fell on Monday, is starting to rise up again. We see thew same thing in the yen—a big drop and now a rapid recovery. This implies risk-off, along with the dollar up against the euro. This leaves the rising pound a total mystery, since it’s not a commodity currency and has various troubles up the wazoo, including soldiers delivering gasoline (in part due to Brexit). The pound slid for a day yesterday but its on a vigorous rise again so far today.

The key to what’s happening may well be bond yields, rising nearly everywhere and the only real threat to equities. Nobody pays attention anymore to bond yield vs. dividend yield and of course, long run, equities always outperform, anyway, if with higher risk.

A cute chart from the Daily Shot the other day explains the durability of the stock market, but doesn’t help much with currencies. See the chart of yields—a sea of green. This accounts for FX prices moving inconsistently with other factors, although it’s NOT the holy grail of determinative factors. Besides, if and when the energy crisis abates into plain-old inflation, those yields will subside, too. Now that New Zealand has joined Norway in raising rates, it remains to be seen if the Fed has the jones to taper in November, leading to hikes in Q2. We say it does, so the dollar gets support from yields and maybe from China, if Evergrande turns out badly. The market is too roily to trade except on the shortest possible timeframe. Trend-following on a daily chart is of no use in an energy crisis.

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