No relief, USD appreciation continues to wreak havoc [Video]

Relief that came with the news of a temporary avoidance of a potential government shutdown remained short lived. Sentiment in stocks markets turned rapidly sour, both in Europe and in the US, while the US treasuries didn’t even react positively to the no shutdown news in the first place. The selloff in the US 10-year bonds accelerated instead; the 10-year yield hit the 4.70% mark, whereas the 2-year yield remained steady-ish at around the 5.10% level. The gap between the US 2 and 10-year yields is now closing, but not necessarily for ‘good’ reasons.

The S&P5500 closed flat but the more rate-sensitive Nasdaq stocks were up. The US dollar index extended gains past the 107 level; the index has now recovered half of losses it recorded since a year ago, when the dollar depreciation had started. The AUDUSD extended losses to the lowest levels since last November as the Reserve Bank of Australia (RBA) maintained its policy rate unchanged at the first meeting under its new Governor Michelle Bullock. The EURUSD sank below the 1.05 level and Cable slipped below a critical Fibonacci support. Crude oil sank below $90pb level, partly due to the overbought market conditions that resulted from a more than a 40% rally since end of June, and partly because the ‘higher for longer rates’ expectations increased odds for recession.