Markets:
- Gold up $6 to $2027
- US 10-year yields up 4.2 bps to 4.135%
- WTI crude oil down 21-cents to $74.55
- S&P 500 up 14 points to 4864
- NZD leads, EUR lags
It wasn’t a blockbuster day in any market as we await some of the top-tier data in the back half of the week. Still, the US dollar asserted itself with the euro falling to a five week low at 1.0823. Higher front-end yields helped the dollar early on but that looks like it was a pre-auction concession and largely reversed by the end of the day as the $60 billion sale found ample bids.
It was another rough one for the yen bulls. USD/JPY fell after the BOJ meeting because Ueda said that steps to normalization would still leave policy stimulative. That was initially seen as a hawkish and USD/JPY fell a full cent but the buyers were waiting in the weeds and took it from 147.00 all the way to 148.70 at the US high before giving some back late in the day as yields came down.
Fed pricing for March is down to 40% odds of a cut so that’s had to work its way into JPY and the timeline to get back to 3% or lower in Fed funds is continually being pushed out, leaving that yield spread over Japan intact.
China stocks bounced and that continued in the US after stimulus and financial backing reports. It also helped commodities and commodity currencies but it was more at the margins. AUD/USD in Asia rose above 0.6600 but sunk all the way to 0.6555 in US trading on USD strength and a sour mood in equities but it later found a footing and managed to eek out 10 pips on the day. That number is hardly inspiring given the China backdrop and it underscores how skeptical the market is that Beijing is really ready to act.