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USD

06 Nov 2023

Peak rates optimism delivers market relief

Markets are steadying after last week’s stunning rally. Equity and commodity futures are edging higher ahead of the North American open, the dollar is trading near a six-week low, and Treasury yields are lower across the curve, with the ten-year trading at 4.59 percent after breaking the 5 percent barrier in late October. To sum up last week’s events: the Treasury said it would push less bond supply into markets than had been feared, the Federal Reserve turned slightly more dovish, and Friday’s jobs report showed labour markets showing clear signs of easing, giving the central bank further room to...

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05 Nov 2023

AUD revival continues

• US jobs. A softer US jobs report added to the downward pressure on US yields & the USD. Equities continue to bounce back. AUD at its highest since late-August.• RBA hike? Attention will be on tomorrow’s RBA decision. Most analysts are expecting a rate rise, but markets are less sure (~60% chance is priced in).• AUD vol. Market pricing points to AUD volatility post the RBA, with a ‘surprise’ no change likely to generate a larger knee-jerk AUD reaction, in our view. Markets were fixated on the latest US jobs report on Friday night. The weaker than predicted figures...

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03 Nov 2023

Sahm-thing is going wrong

Market reaction to this morning’s non-farm payrolls report looks slightly overdone, with price action heavily position-driven. The long-dollar trade had unquestionably become overcrowded, and many investors are now desperately trying to top-tick long-term yields, with buying activity surging in the belief that they have peaked. Many of the underlying details still look stable, and widespread strike activity through late September and early October likely subtracted more than 50,000 roles from the headline print, leaving three-month job creation rates remaining relatively strong. It is very unlikely that the US economy is currently in recession. The Sahm Rule, named after former Federal...

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03 Nov 2023

North American job creation engines slow, weighing on yields

The US labour market slowed sharply in October, suggesting that the Federal Reserve is likely to remain on hold through the early part of next year. According to data released by the Bureau of Labor Statistics this morning, just 150,000 jobs were added, down from a revised 297,000 in September, and the unemployment rate crept higher to 3.9 percent. Average hourly earnings rose 0.2 percent month-over-month, modestly below expectations. Ahead of the release, “whisper number” estimates had forecast a 200,000-job gain and the unemployment rate was seen holding at 3.8 percent. The dollar is weakening, equity futures are pushing higher,...

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03 Nov 2023

Directional momentum slows into US payrolls report

Happy non-farm payrolls day, to all who celebrate. Ahead of the most important release on the monthly economic calendar, markets are working to demolish the Federal Reserve’s “higher for longer” narrative. Investors, apparently comforted by Jerome Powell’s words during Wednesday’s post-meeting press conference, have dramatically lowered odds on another interest rate hike in the coming months, and have moved to add two rate cuts to 2024 – in addition to the two already priced in. After breaking above 5 percent for the first time since 2007 last week, ten-year Treasury yields have lost almost 35 basis points, marking one of...

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