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JPY

22 May 2023

US debt ceiling still in focus

• US debt ceiling. Talks are set to restart today. A deal is needed to be agreed quickly given the ‘x-date’ is fast approaching.• Fed pricing. Markets pricing in a chance of a June Fed hike, but are still looking for ~2-3 cuts by January. An unwind of these bets could be USD positive.• AUD holding. Limited local data flow. Global events will drive the AUD near-term. AUD/NZD sub 1.06. Tomorrow’s RBNZ meeting is in focus. It has been a quiet start to the new week with limited moves across markets as participants await the latest round of US debt...

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22 May 2023

Dancing on the US debt ceiling

US debt ceiling shenanigans, a repeated source of market volatility over the past decade or so, are rearing their head once again. After tentative progress was made last week negotiations look to have reached an impasse. Reportedly, the Republicans are continuing to push for sizeable reductions in government spending, particularly in areas such as healthcare, education, and housing, while also maintaining high spending on defense and the Trump-era corporate tax cuts. The two sides have agreed to resume talks with President Biden and House Speaker McCarthy set to meet on Monday, but things clearly remain fluid. The clock is ticking...

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21 May 2023

US debt ceiling: two steps forward, 1 step back

• US debt ceiling. Talks hit an impasse. Negotiations set to resume later today. A deal is needed quickly with the ‘x-date’ coming closer into view.• AUD sluggish. Global forces will continue to drive the AUD. Beyond the debt ceiling, the global economy is slowing. This is normally a headwind for the AUD.• RBNZ hike. AUD/NZD has slipped below 1.06. RBNZ meets on Wednesday. Following the NZ Budget expectations of another ‘hawkish hike’ have risen. Optimism regarding a US debt ceiling deal faded a bit on Friday, with negotiations reaching an impasse. US equities lost some ground (S&P500 -0.1%), while...

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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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