Market wrap: US dollar index is up 0.5% - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: US equities made fresh record highs again, and the US dollar preserved yesterday’s gains. US bond yields fell, despite strong economic data.

Interest rates: US 10yr yields initially extended yesterday’s rise to 2.37% but reversed during the London morning to 2.32% and then consolidated. ISM manufacturing and construction data may have helped halt the yield slide. Fed fund futures yields continued to price the chance of a December rate hike at 77%.

Currencies: The US dollar index is up 0.5% on the day, but most of those gains came before the London/NY session where it consolidated. EUR preserved yesterday’s slide to 1.1730, unrest in Catalonia possibly contributing. USD/JPY reversed yesterday’s gains, falling from 113.06 to 112.53. AUD rebounded from 0.7796 (a six-week low) to 0.7840. NZD rebounded from 0.7168 to 0.7218. AUD/NZD ranged sideways between 1.0855 and 1.0880.

Economic Wrap

US construction spending rose 0.5% (vs 0.4% expected), with strength in both new private construction and home improvements (despite Hurricane Harvey). Public construction was weaker than expected though. ISM manufacturing rose from 58.8 to 60.8 (vs 58.1 expected), with some of the rise attributable to hurricane-related rebuilding. That activity should extend into year-end.

FOMC hawk Kaplan thought rate hikes may not be as much as people thought, and was undecided about December. Dove Kashkari thought the Fed should wait until after PCE inflation has reached 2% before hiking further."