Forex today: dollar remains in broad bearish trend, but who will the next Fed chairperson be?
Forex today was absent of any major events, although there are some hints from today's rhetoric from Washington/Fed and talking heads around the theme of Trump's fiscal policy and interest rates that should be noted.
US rates and the greenback were lower on the back the idea that Fed's Powell, who pulled even with Warsh in betting markets for the next Fed chairperson, could be seen as possibly more ideologically aligned with the Trump administration's fiscal plans, known for advocating for easy rates and reducing bank regulations. This equated to lower US yields.
Jerome "Jay" Powell brings deep Wall Street roots to the job from his tenure as a partner at the Carlyle Group from 1997 to 2005. He also is a current voting member of the policymaking Federal Open Market Committee.
The DXY stalled against August highs (94.00-20) and remains within the broader bear trend. The yield on the US 10-year note eased to 2.33%. Fed fund futures yields, in stark contrast, firmed and now price the chance of a December rate hike at 82%.
EUR rose from 1.1700 to 1.1773 while Euro bond spreads that continue to feel under pressure from the Catalonia vote implications. GBP was lower on a bad UK Construction PMI miss. USD/JPY was higher on the back of stocks and the S&P 500 is at a new record on the back of easy financial conditions.
As for the antipodeans and commodities, the AUD scored a three-month low at 0.7786 but then recovered to 0.7835 as the USD retreated. However, it was the Kiwi that was the day’s underperformer, falling from 0.7180 to 0.7150 on the back of a disappointing GDT dairy auction result. AUD/NZD moved higher from 1.0885 to 1.0950. CAD was slightly stronger while BoC’s Leduc was bullish long-term for the Canadian economy.
Copper sideways although technically bullish. Gold was the lowest in nearly two months within a strong technical sell-off since 7th Sep forming descending channel. Oil was also lower and for the second day with Russia saying, there is no need for further production cutback talks.
Key events in Asia and USA
Analysts at Westpac noted the key forthcoming events for Australia as being, "Sep AiG Services PSI was last at 53.0, a still upbeat level after a 3.5pt fall in the month. Business services are leading the positive mood," ahead of US events today, "US: Sep ADP employment is out ahead of payrolls on Friday. A softer pulse of 160k is expected given the disruption caused by the Hurricanes Harvey and Irma. Sep ISM non-manufacturing is expected to edge down to a still solid level at 55.1, in line with the Markit measure. Fed Chair Yellen gives welcoming remarks at the ‘Community Banking in the 21st Century Research and Policy Conference’, where Bullard also speaks."
Key notes from US session
- Wall Street closes at new record highs amid upbeat car sales data
- Spanish King Felipe VI: Catalan authorities have disparaged democratic values
- Canada: employment data to show how labor market ended Q3 - Wells Fargo
- BoC's Leduc: Significant challenges remain with Canadian productivity still "well below" US
- OPEC's Barkindo: We look to strengthen energy dialogue with Russia
- Russia's Novak: No immediate need to talk about additional output cuts
- Fed’s Powell: Current capital standards in US ‘are about right’
- NZD/USD slumps to mid-0.71s on disappointing GDT auction outcome