OVERNIGHT DATA AND HEADLINES
• US equity markets and treasury yields bounced overnight as the FOMC minutes weren’t as dovish as some were expecting. The minutes suggested that the recent 25bp move was a "mid cycle adjustment" rather than a pre-cursor for any further pre-defined cuts. The Federal Reserve debated cutting interest rates more aggressively at its last meeting, although central bankers were united in wanting to avoid the appearance of being on a path to more rate cuts, records from the meeting showed. The meeting also included discussion of the Fed's research into potential changes to its approach to setting policy. A number of policymakers said the Fed could have been more aggressive in using bond purchases to fight the 2007-09 recession.
• European equities opened with small gains and pushed higher over the European morning with gains of more than 1% seen ahead of the US session.
• Wall Street's indexes rose as upbeat earnings from retailers pointed to strength in U.S. consumer demand, and held gains after minutes from last month's Federal Reserve meeting showed policymakers had debated a more aggressive interest rate cut. Dow Jones up 240 points (0.93%) 26,202, S&P 500 up 23 points (0.82%) to 2,924 and Nasdaq up 71 points, or 0.90%, to 8,020.
• Little in the way of data with no reaction seen to better than expected UK Public Sector Net Borrowing for July.
• Trump took to twitter for what is now almost a daily ritual as he attacked the Fed over interest rates. Data wise US existing home sales grew by 2.5% - positive result based on 2.2% expectations..
• Plenty of Brexit headlines flying around. But it was comments from a French official that no-deal is now the baseline scenario that sent GBP to a low of 1.2112.
• Benchmark 10-year U.S Treasury yields rose off session lows after the minutes - 10-year notes fell 5/32 in price to yield 1.576%, up from 1.559% late on Tuesday.
• Copper prices edged - Benchmark LME copper ended 0.3% higher at $5,730 a tonne, having touched a two-week low on Tuesday.
• Lead was at a one-week high on supply disruptions, closing 1.2% higher at $2,086 a tonne. Aluminium eased 0.1% to $1,779 a tonne
• Gold edged lower falling down 0.2% at $1,502.00 per ounce
• Oil futures steadied after U.S. government data showed a drawdown in domestic crude stocks but rises in refined product inventories, while lingering worries about the global economy weighed on the market. Brent crude futures rose 27 cents to settle at $60.30 a barrel, down from a session high of $61.41.
• The U.S. dollar edged off two-week highs, providing some support to dollar-denominated commodities
• China's yuan inched up against the USD in thin trade on Wednesday - onshore CNY opened at 7.0566 and was changing hands at 7.0620.
• AUD squeezed up to 0.6799 with EUR reaching 1.1107.
• USD/CAD was heavy taking out stops on a run below 1.3300 ahead of the inflation numbers for July. The CPI data was surprisingly strong at 0.5% for the month and 2% annually (1.7% forecast) which saw USD/CAD make a low of 1.3254.
EVENT RISK TODAY
• No Australian Economic data releases.
• GE, FR, EU – August Manufacturing and Services PMI’s
• Europe – August Consumer Confidence
• US – Weekly jobless claims, August Manufacturing and Services PMI’s, July Leading Index & Kansas City Fed Manufacturing Activity Index
AUD thoughts :
AUD added to overnight gains, buoyed in early NY as risk assets rally (US stocks up on positive earnings from retailers). AUD managed a bounce towards 0.6799 highs but paused ahead of the Fed minutes. Small sell-off back towards 0.6780 on the release.
AUD shorts are frustrated with a lack of downside progress and emerging central bank risk in the form of the Fed's Jackson Hole gathering (Friday night) may lead to revisions if it adds to dovish sentiment on the U.S. rates. Another factor stymieing shorts could be reduced concerns about recession. The U.S. 2s-10s curve has steepened recently, undoing its inversion. Upbeat earnings reports from large U.S. retailers Target and Lowe's have eased concerns about slowing economic growth, boosting risk-sensitive assets. Equities and global bond yields have firmed while JPY selling drove AUD/JPY towards 72.50. The upbeat risk sentiment has AUD threatening to break above 0.6800. Should the lift extend beyond that area key resistance near 0.6835 is targeted (38.2% Fibonacci level from the recent 0.6677 low / 0.7083 high). Resistances at 0.6910/15 and 0.6955/60 are in play if 0.6835 breaks.