- Fed's Daly: We can easily find ourselves overtightening
- Timiraos: Fed 'barreling toward' a 75 bps hike in November
- Canada August retail sales +0.7% vs +0.2% expected
- Baker Hughes US oil rigs +2 to 612
- Fed's Bullard: I want rates that put significant downward pressure on inflation
- Japan's Kanda: We would not comment on intervention even if we had done it
- Fed's Evans: We will need to raise rates further and hold them for awhile
- Eurozone Oct flash consumer confidence -27.6 vs -30.0 expected
- Penny Morduant confirms she's running to replace Liz Truss
- US may set Russia oil price cap above $60
Markets:
- Gold up $27 to $1654
- US 10-year yields down 1 bps to 4.22%
- WTI crude oil up 48-cents to $84.99
- S&P 500 up 88 points to 3754
- JPY and AUD lead, USD lags
This week had it all and a good portion of it unwound today. We looked like we were going to get the 13th straight day of USD/JPY gains after the BOJ signaled no change in policy by expanding bond purchases. That kicked off a spike to 151.94 but the turn came when the Fed appeared to plant a WSJ story downplaying the odds of another 75 bps hike in December.
There was a blip in USD/JPY at the same time that might have been the start of Japanese intervention. It also kicked off a recovery in equities and cap in yields, especially at the short end.
What had been a trickle turned into a flood with some surprisingly dovish signals from some-time Powell mouthpiece Mary Daly, who is the President of the SF Fed. She indicated that 4.50-5.00% is still the Fed top, despite the market trying to price in another hike. Around the same time, the MOF came in with the hammer, intervening in USD/JPY and sending the pair lower by more than 400 pips.
The combination of dovish signals and FX intervention kicked off a rout on the US dollar with the pound reversing heavy losses despite the political turmoil. The euro and commodity currencies also staged large reversals.
May Fed funds now price 4.87%, down from 5.03% on Wednesday and the front end of the Treasury curve rallied alongside an impressive day for equities. It's clearly a market that just wants a bit of certainty from the Fed before putting some money to work.
The weekly gains in stocks were the largest since late June with the S&P 500 up 4.7% with half of that today.
Have a wonderful and restful weekend because next week kicks off a wild run of central bank decisions.
