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GBP

Majors settle into ranges ahead of data-intensive week

Ahead of a week in which hard data will take precedence over central bank jawboning, equity indices are slightly softer, oil prices are holding firm, Treasury yields are flat, and all major currencies look firmly rangebound. Foreign exchange markets continue to ignore signs of dysfunction in the US political system: The dollar remains unbowed after the ratings firm Moody’s lowered its outlook on US debt to “negative” from “stable”, putting it on course toward joining Standard & Poor’s and Fitch in downgrading the country’s sovereign credit rating. And with newly-minted Speaker Mike Johnson’s can-kicking bill likely to face a vote...

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US data in the spotlight

• Positive sentiment. US equities rose sharply on Friday, while oil & bond yields ticked up. USD consolidated. AUD stabilised after a torrid few days.• RBA projections. RBA revised up its growth outlook. It is also forecasting a slower return by inflation to target. Risk of another rate hike remains.• Event radar. Offshore, US CPI, US retail sales & the China activity data are released this week. Locally, Q3 wages & the monthly jobs report are due. In contrast to the softness during Friday’s Asian and European sessions, risk appetite was positive in US trade. US equities rose sharply with...

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Risk appetite fades after Powell shuts door on doves

Foreign exchange markets are trading with a mild risk-off tone after yesterday’s disappointing Treasury auction and hawkish commentary from Federal Reserve chair Jerome Powell helped lift yields and bolster demand for the dollar. Equity futures are setting up for a modestly softer open, commodity prices are still trending downward, and rate-sensitive currencies—like the Canadian dollar—are back on the defensive. Yields reversed higher yesterday morning after a $24-billion auction of 30-year Treasuries failed to meet sufficient demand, with a “tail”—the extra premium demanded by investors to hold long-term paper—exceeding 5 basis points. The pension funds and insurers which typically absorb the...

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Oil slick

• Mixed markets. Equities ticked up with the S&P500 enjoying its 8th straight gain. USD index consolidated, but commodity currencies like the AUD slipped back.• Bonds & oil. The slide in long-end bond yields & oil continued. US 10yr yields are now ~50bps below the late-October peak. Oil is at a multi-month low.• AUD stumble. AUD has given back ~1/2 its recent rebound. Domestic wage & jobs data released next week could see AU rate expectations rebound. With not too much economic news most markets have consolidated over the past day. Equities have generally ticked up with the major European...

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All talk, no action in markets

The dollar is staging a modest rebound after a cast of hawkish Fed speakers worked to put the rate cut genie back in the bottle yesterday. In a series of appearances, Bowman, Goolsbee and Logan all noted that inflation remained too high and the labour market was still healthy by pre-pandemic standards, and Neel Kashkari told Bloomberg there’d been “no discussion” of lowering interest rates among policymakers. Bets on at least four quarter-point cuts by early 2025 slipped slightly through the session, and Treasury yields retraced some of their gains. More Fedspeak is in the offing today: Traders are expecting...

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