Market wrap: US dollar index down 0.3% - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: The US dollar and bond yields fell after Trump disbanded two business advisory councils following CEO defections, and again after the FOMC minutes.

Interest rates: US 10yr treasury yields fell from 2.28% to 2.22%, 2yr yields from 1.36% to 1.32%. Fed fund futures yields slipped, pricing the chance of a December rate hike at around 43% (from 47%).

Currencies: The US dollar index is down 0.3% on the day, EUR bounced off 1.1682 to 1.1779. USD/JPY fell from 110.95 to 110.03. Outperformer AUD rose from 0.7840 to 0.7927. NZD rose from 0.7235 to 0.7315. AUD/NZD probed higher from 1.0820 to 1.0868 – a four-month high.

Economic Wrap

In the FOMC minutes of the July meeting, "most" officials see inflation picking back up to 2% over the next couple years and "many" see recent low inflation as a function of idiosyncratic factors, signalling that the central mass at the Fed continues to favour another hike before the year is out. That said, Fed cohesion on this front seems weaker than previously, the more cautionary group now amounting to "some". They argue the Fed can "afford to be patient", while "several" indicate that the risks to inflation could be tilted to the downside and "many" see some likelihood that inflation could remain below 2% for longer. With this group apparently larger and more vocal than past meetings, markets are reading the minutes with a dovish bias. On the balance sheet, "several" are agitating for a July start but "most" prefer to defer a decision until the next meeting (i.e. Sep 20).

US housing starts fell 4.8% in July (vs +0.4% expected). The weakness is mostly a multi/high rise story, that sector down 15.3%. Single family housing starts fell 0.8% after an 8.2% gain in the prior month. Building permits fell 4.1% (vs -2.0% expected)."