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JPY

17 May 2023

US debt ceiling optimism

• US debt ceiling. Positive rhetoric from both sides supported sentiment. US equities & bond yields rose. USD index firmer, with AUD ~$0.6660.• Fed speak on the radar. In addition to the debt ceiling, US Fed speakers will be in focus the rest of the week. Markets pricing ~3 rate cuts by January.• Labour market data. April Australian labour report due today. Labour market is a lagging indicator. Data for April reflects the state of play ~6-months ago. A more positive tone to markets overnight with comments on both sides of the US political spectrum easing fears of a potential...

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17 May 2023

Dollar steamrolls higher on pullback in rate cut bets

The dollar is climbing this morning, ostensibly benefitting from safe haven flows as the political theatre surrounding the debt ceiling negotiations reaches a higher pitch. But with President Biden poised to return early from the G7 summit in Japan and House Speaker McCarthy saying “It is possible to get a deal by the end of the week. It’s not that difficult to get to an agreement,” we suspect other forces are in play. Yesterday’s retail sales report – which showed underlying US consumer demand remaining surprisingly robust for a third consecutive month – may be triggering a broader rethink on the...

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14 May 2023

Higher inflation expectations are a worry for the US Fed

• US inflation worries. Jump in US inflation expectations should catch the US Fed’s eye. Market pricing for multiple Fed rate cuts looks misplaced.• USD rebound. Higher yields supported the USD. US retail sales & Fed speakers in focus this week. Reduction in Fed rate cut pricing should be USD positive.• AUD slips back. The AUD has extended its slide. Local and offshore data should generate AUD vol. On net, we think the AUD can fall back further. Markets nervousness continued into the end of last week, with growth concerns, higher US inflation expectations, and US debt ceiling worries weighing...

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11 May 2023

Global growth worries re-emerge

• Growth worries. Global growth concerns re-emerged after a run of soft data, particularly out of China. Copper is at its lowest since late-November.• Risk off tone. Bond yields fell back & the USD strengthened. The Bank of England hiked again, but questions about how much more it will do remain.• AUD weaker. The negative backdrop has seen the AUD underperform. We expect this challenging environment to remain in place for a while yet. Concerns about global growth picked up overnight following a string of softer than anticipated data, particularly out of China. US equity markets eased modestly (S&P500 -0.2%),...

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10 May 2023

Has Fed rate cut pricing gone too far?

• US inflation. Some tentative signs the US inflation pulse is cooling. But core inflation remains a long way from the Fed’s target.• Fed pricing. Interest rate markets appear too eager to price in the Fed cutting cycle. Expectations that cuts could start as soon as July look misplaced.• AUD resistance. AUD ticked up, but again found resistance ~$0.68. Another Bank of England rate hike & hawkish tone could see AUD/GBP slip back. Mixed fortunes and choppy trade across markets, with the latest US inflation print in focus overnight. US equities endured some intra-day volatility but ended the day in...

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