Forex news for New York trade on September 7, 2021:
- US sells 3-year notes 0.447% vs 0.450% WI
- El Salvador's President tweets that the country has bought an additional 150 bitcoin
- New Zealand GDT dairy auction prices +4%
- Japanese parliament will officially name a new Prime Minister on Oct 4.
Markets:
- Gold down $29 to $1794
- WTI crude down 87-cents to $68.42
- S&P 500 down 12 points to 4522
- US 10-year yields up 5 bps to 1.373%
- USD leads, CAD lags
The news flow as ultra-light today but the price action certainly wasn't with large moves everywhere, particularly in crypto, where ethereum fell nearly 25% in a sudden crash before recovering half the drop. Bitcoin finished around 9% lower as El Salvador officially adopted bitcoin as legal tender and there was a strong 'sell the fact' trade.
In FX, the dollar had a strong bid throughout the day that never really relented. Eyes were on higher Treasury yields but that begs the question: What was boosting bond rates? The question is especially tough to answer because the move in rates since weak non-farm payrolls has been counter-intuitive.
I've seen a few theories:
- Less fear of a Fed policy mistake that would prematurely snuff out growth and inflation
- A concession for bond auctions this week
- Worries about China selling for 'Common Prosperity'
- The reversal of delta fears
- Bottleneck and inflation fears
I'm sympathetic to all those ideas to some extent and we took out a meaningful level in 10s (the Aug double top) but it's still early days and there are flows around the new month.
It was instructive though that AUD sold off despite continuing the taper. Granted, they delayed the future taper but compared to expectations, I'd still argue it was hawkish.
In the spotlight next is the Bank of Canada decision tomorrow. USD/CAD was battered today, likely on fears the BOC will hint at a delay in their own taper. I don't think that's coming because we're two weeks from an election and the plan isn't to taper until October anyway. So I suspect they highlight 'uncertainty' while offering the usual bravado about growth eventually.
