Forex news for US trade on Sept 23, 2021:
- US initial jobs claims 351K vs 320K estimate
- Canada July retail sales -0.6% vs -1.2% expected
- Schumer: We have "agreement on a framework" to pay for US reconciliation package
- Markit Sept US services flash 54.4 vs 55.0 expected
- Bitcoin jumps after twitter says users will be able to tip with crypto
- US sells 10-year TIPS at -0.939% vs -0.917% WI
- US household net worth rose to $141.7T in Q2 vs $118.5T a year earlier
- KC Fed manufacturing index 10 vs 22 prior
- BP says it may have to ration UK petrol deliveries, cites transportation difficulties
- Key things to note from the BOE decision today
Markets:
- Gold down $21 to $1747
- S&P 500 up 53 points to 4448
- WTI crude oil up $1.00 to $73.22
- US 10-year yields up 9.2 bps to 1.42%
- NZD leads, JPY lags
With the Fed out of the way and more indications that China is prepared for Evergrande (and could even stimulate real estate) the market embraced the warm-and-fuzzies with a classic risk-on move, the kind we haven't seen in awhile.
That meant higher stocks, higher commodities, a jump in risky FX and, notably, higher yields. The rates market used to work with stocks in that way but more recently, there have been times when higher yields cause fright in equities. It's particularly stark today given such a large move to a two-month high in yields.
Ultimately though, 1.42% 10-year rates are still extremely low by historical standards and we could be seeing a shift back to the reflationary trade.
In terms of correlations, it was what you would expect with the dollar doing better against the low-yielding yen, euro and franc. USD/JPY held a steady bid to finish a half-cent higher at 110.30. That pair has been dead for months but it will be one to keep an eye on if this move in yields continues.
It wasn't just US rates that moved up so the rest of the world kept pace with the dollar and the better mood provided strong backing for the commodity currencies. AUD and NZD were strong in New York while the loonie moved earlier.
Cable liked what it heard from the BOE but the rally in GBP was mostly about the risk trade, as it kept pace with the commodity currencies. GBP/USD is still only half-way back to the Sept 15 open so it's way too soon to draw any conclusions but the rally looks to have formed a triple bottom at the Aug and July lows.
