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Cautious Market Tone Dampens EM FX

CROSS ASSET
  • Despite Fitch Ratings warning that the US’ AAA rating is at risk over the debt deal impasse, House Speaker Kevin McCarthy has signalled optimism that a deal will eventually be reached to avoid a catastrophic default. Nevertheless, G10 FX trades with a risk-off tone, evidenced by USD and JPY topping the pile. Equity futures are mixed, though tech heavy indices and chipmakers have been buoyed by Nvidia’s far-stronger-than-expected revenue forecast.
  • The cautious market tone has weighed in on EM FX, with the backdrop of a strong greenback providing headwinds to any potential gains. Earlier today, Bank Indonesia held its key rate at 5.75%, as was expected by all surveyed analysts. HUF is the notable underperformer having gained almost 1% against the EUR on Wednesday. ZAR is also among the weakest in the space ahead of the expected 50bp rate hike later today. The SARB and CBRT rate decisions headline the session:
  • Later today, a slew of US data crosses including the second reading of Q1 GDP, Initial Jobless Claims and Pending Home Sales. Fedspeak from Richmond Fed President Barkin and Boston Fed President Collins will cross.

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