Markets:
- Gold up $24 to $1964
- US 10-year yields down 7 bps to 3.71%
- WTI crude oil down $1.44 to $71.09
- S&P 500 up 27 points to 4294, or +0.6%
- NZD leads, USD lags
The US dollar has been on a yo-yo this week but at least there was some fundamental backing today. The jump in initial jobless claims was the highest reading since 2021 and, though it’s only one data point, the market is taking it as a sign of a slowing US economy and peak fed funds. The odds of a 25 bps hike next week are down to 25%.
The euro and pound made particular headway against the dollar in North American trade as the euro stretched to a two-week high of 1.0761 from 1.0700. Cable rose 80 pips to 1.2560, which is a three-week high.
The antipodeans were also strong but the gains against the dollar were just enough to return them to the peak levels following the RBA rate hike.
CAD wasn’t able to take advantage of the weaker US dollar and is only marginally above where it was before the BOC hike. A big reason for that is that oil plunged on the prospect of 1 mbpd of Iranian exports coming to the market. That story was denied but there’s enough smoke to leave traders worried about fire, and for oil to fall 2%. CAD also underperformed alongside MXN on the idea of US-led continental weakness.
Bonds were back in the spotlight as well as Treasury yields fell across the curve. That weighed on USD/JPY, lowering the pair 120 pips to 138.90, which is the lowest this week.