- The US dollar and US interest rates fell after Fed official Williams signalled significant easing is necessary. The S&P500 is up 0.3%, with an upbeat US business survey offset by mixed company earnings. UK’s Parliament voted to make a no-deal Brexit more difficult.
- US 2yr treasury yields fell from 1.84% to 1.76%, while 10yr yields fell from 2.08% to 2.03%. Markets priced 38bp of easing at the 31 July meeting (from 33bp yesterday), encourage by William’s signal that a 50bp cut is possible.
- Australian 3yr government bond yields initially rose to 0.93% before following US yields lower to 0.89%, 10yr yields ranging between 1.34% and 1.38%. Markets priced a 15% chance of an RBA rate cut in August (from 20% yesterday).
- Commodities: Brent crude oil fell 2.0% to $62.00, weighed by the resumption of Russian pipeline flows. Gold rose 1.3% to $1447 – the highest since 2013 – on Fed easing expectations.
- The US dollar index is down 0.4% on the day, with most of the fall occurring after Williams’ speech.
- EUR rose from 1.1210 to 1.1270.
- Outperformer GBP rose from 1.2400 to 1.2544 following the Brexit-related vote.
- USD/JPY fell from 108.00 to 107.40 – a one-month low.
- AUD rose from 0.7030 to 0.7071 – a three-month high.
- NZD rose from 0.6740 to 0.6871 – a three-month high.
- AUD/NZD rose slightly from a four-month low of 1.0400 to 1.0445.
- Aussie bulls are up and about on the back of domestic employment data, dovish Fedspeak to lead the G10 currencies.
- US-China trade developments, market risk sentiment will be closely followed amid a dearth of major data/events.
While Wednesday’s jobs report initially built the Aussie run-up, dovish comments from the key Federal Reserve policymakers fuelled the quote towards 12-week high as it trades near 0.7075 this morning.
No change in the Unemployment Rate and an upbeat reading of the Fulltime Employment data tamed expectations of successive rate cuts by the Reserve Bank of Australia (RBA) and pleased the Australian Dollar (AUD) buyers the previous day.
Adding to the sentiment, with a great force, were the US Federal Reserve policymakers that highlighted prospects of 50 basis points Fed rate cut with their statements favouring the need for "swift" and "pre-emptive" action.
However, the presence of risk aversion and doubts over the US-China trade deal remain present with the US 10-year treasury yield revisiting early-month levels around 2.02% by the press time.
Investors may now concentrate more on the qualitative catalysts amid lack of data on the economic calendar. Among them, signals for the Fed’s future monetary policy and the trade-related headlines might lure the short-term traders.
Event Risk Data Today
- Japan: Jun CPI is expected to show headline inflation holding at 0.7%yr.
- US: Jul University of Michigan consumer sentiment (preliminary) is anticipated to remain above average at 98.4. Fedspeak involves Bullard on technology and the future of the financial system and Rosengren sits on a panel on central bank independence at an event at Columbia University