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Rates Dictate Play, Keeping USD Firm

FOREX
  • Rates markets continue to dictate play early Thursday, with the further run higher for longer-end yields putting markets under more pressure. Both 10- and 30-y US yields again hit the best levels since 2007 as the steepening move accelerated and markets continue to bake-in the higher-for-longer theme across asset prices. This has supported the greenback across Thursday trade, keeping the USD Index within range of recent highs.
  • Equity markets are lower across the board through the European morning, with poor performance across China and Hong Kong markets feeding directly into poor trade on the continent. The broad risk-off is helping support the JPY and CHF, both of which are toward the top-end of the G10 table.
  • AUD and NZD are faring more poorly, with the firmer USD, softer labour market data and disappointing Chinese home sales data working against the currency. The technical backdrop remains bearish on the currency, with short-term gains still considered corrective. Attention is on $0.6286, the Oct 3/13 low. A clear break of this support would confirm a resumption of the trend and open 0.6215, a Fibonacci projection.
  • Weekly jobless claims from the US are the data highlight Thursday, with existing home sales and the Philly Fed Business Outlook the other key releases. While data will be watched, the appearance from Fed's Powell will likely take more focus.
  • The Fed chair speaks from the Economic Club in New York. While markets expect little from the Fed on rates at the November meeting, the near 50/50 pricing for another 25bps hike at some point across this cycle leaves an element of uncertainty and will be key for the trajectory of the USD across the week.
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