- Forex today has the DXY higher by 0.1% while risk sentiment was more elevated and balanced.
- US ten years climbed from 2.32% to 2.36% while higher betas were subdued.
Markets were confident that the House would pass the tax bill with results as follows: the US House voted 227-205 to overhaul the tax code. 13 Republicans voted no. However, markets now need to wait for the Senate Finance Committee's vote on tax reform and that is where things could all fall apart while senators have expressed serious misgivings over the cost and effect on the middle class. This may not take place until after Thanksgiving though, (Thanksgiving is 23rd November).
US 10yr treasury yields climbed from 2.32% to 2.36%, while the 2yr yields made another nine-year high moving from 1.69% to 1.71%. Fed fund futures yields continued to price the chance of a December rate hike at almost 100%. Within the improved risk sentiment, US stocks bounced amid solid company earnings but the yen was not persuaded above the 113 handle until late in the shift when the hourly cluster of MA's resisted.
USD/JPY fell from 113.30 in European trade down to 112.73 on the morning of the NY shift where it bounced to 113.07 the high. The euro was consolidating recent gains between a range of 1.1760-1.1800. GBP/USD was unable to capitalise on the UK data where retail sales beat expectations or the noise that PM May will increase the Brexit exit payment. The UK data showed that there was a modest m/m growth of 0.3% in October betaing 0.1% consensus. Sterling failed at 1.3205 as a triple top but stayed in a range of 1.3180-1.3208 for the best part of the US shift. BoE's Carney said that there will likely be just two more rate hikes in coming years, anchoring the pound while the cross kept to a 0.8967-0.8913 range. As for the antipodeans, AUD/USD ranged sideways between 0.7580 and 0.7602 while the Kiwi dropped to 0.6836 before recovering to 0.6866.
Key events in Asia:
Analysts at Westpac noted that Manufacturing PMI has been elevated for some time. Q3 PPI holds little interest since it has been superceded by Q3 CPI.
Key notes:
- Wall Street ends day with substantial gains on improved sentiment
- Fed's Mester: Inflation likely to hit two percent target by end of 2018
- Dollar Index approaches daily highs after US House vote on tax cuts
- US House passes sweeping tax legislation, sending measure to Senate - Reuters
- Fed's Kaplan: There's no question cyclical pressures on inflation are building
- Fed's Kaplan: If unemployment rate rises, that could be sign of a coming recession
- US: Homebuilder confidence extends gains in November - Wells Fargo
- Market is underestimating the extent of next year's Fed tightening? - Scotiabank
- Crude oil prices holding at the lower end of their weekly ranges
- US Industrial Production: Noisy data masks underlying improvement - Wells Fargo
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