Analysts at Westpac offered their market wrap and highlight the key risk events ahead.
Key Quotes:
"Global market sentiment: US interest rates rose and some equity indices made all-time highs, while the US dollar fell. There was little news to drive markets.
Interest rates: US 10yr yields rose from 2.21% to 2.24% (a fresh one-month high), 2yr yields from 1.38% to 1.40%. Fed fund futures yields continued to price the chance of a December rate hike at 56%.
Currencies: The US dollar index is down 0.3% on the day. EUR ranged between 1.1960 and 1.2007. USD/JPY fluctuated in a slightly higher range of 111.20-111.90. AUD was supported by USD weakness, rising from 0.7960 to 0.8020. NZD similarly rose from 0.7280 to 0.7327. AUD and NZD were the two best performers, with the latter slightly ahead, pushing the cross from 1.0960 to 1.0934 (a one-month low).
Economic Wrap
US housing starts fell 0.8% in August (vs +1.7% expected), while building permits rose 5.7% (vs -0.8% expected) – a decent result considering hurricane disruptions. Import prices rose 0.6% and export prices rose 0.6% (both beating expectations of 0.4% and 0.2%, respectively), led by fuel imports and non-agricultural exports.
The GDT dairy auction resulted in prices overall rising 0.9%, led by fat products (AMF +5.3%, butter +1.2%). WMP rose 0.6%, in line with earlier futures pricing.
Event Risk
NZ: the Q2 current account balance is expected to remain at -3.1% of GDP, with exports remaining firm.
Australia: Aug Westpac-MI Leading Index was last at -0.32%, having swung from well above trend to back below trend in recent months. RBA Assistant Governor Ellis speaks at an ABE briefing, Sydney 1:05 pm.
UK: Aug retail sales are expected to rise 0.2% following a 0.3% gain in Jul. Effects from a recently stronger pound are balanced by softer housing prices.
US: The FOMC interest rate decision is widely expected to be on hold. It has been well-telegraphed that the specific start date of the balance sheet normalisation plan will be announced at this meeting. Areas of interest for policy going forward centre on forecasts for inflation and the fed funds rate, which recent communications indicate may come under some pressure. Aug existing home sales are expected to rise 0.6% but have a lost a bit of momentum in recent months."
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