The progress on the U.S. debt ceiling helped restore risk appetite in Asia, and the dollar was firmer against most major currencies expect NZD.
The U.S. Senate approved legislation that increased the debt ceiling through December 3 with a vote of 50-48. The bill is expected to pass the House.
USD/JPY was bid higher towards 112 on improved risk sentiment. Higher yields and gains in oil prices also underpinned. Japan’s August household spending was disappointing at -3% y/y (vs. -1.5% y/y expected) suggesting Q3 GDP contraction is likely. PM Kishida’s first public address is scheduled for today, and fiscal stimulus hopes remain high.
NZD/USD rose to 0.6949 but gains were reversed later and pair was last seen trading below 0.6940. AUD/USD heading back to the 0.73 handle and AUD/NZD slid to 1.0529.
China markets returned from Golden Week holiday but remained quiet. Contagion risks from Evergrande have increased as two more property developers – Funtasia and Sinic – missed obligations.
The USD lost ground against the riskier currencies through the US session as equities rallied, helped by the news that an agreement had been reached to extend the debt ceiling until December. Risk sentiment as likely also helped by energy prices easing off their highs, though not enough to undermine appetite for the commodity currencies. USD/CAD was the best performer, dropping below 1.2550 from above 1.2580 at the US open, but GBP and AUD also made gains. EUR/USD and USD/JPY were relatively steady, but the former later slipped back to near the day’s lows near 1.1550, though the latter moved above 111.60.
US initial claims data was the only significant release. These showed a steeper than expected fall to a 4 week low of 326k from 364k, to fully erase 2 straight sharp gains that were more than fully explained by California. Continued claims cover the week before initial claims, and also saw a larger than expected fall, to 2.714m from 2.811m, matching a post-crisis low seen 3 weeks ago. Central bank talk saw Fed’s Mester, ECB’s Lane and BoC’s Macklem all downplay current inflation strength, though Mester did see risks on the upside going forward.
05:00 GMT - JP: Economy Watchers Survey (Sep) (Mkt: 48.5 Prev: 43.7)
06:00 GMT - DE: Current Account (NSA) (Aug) (Mkt: 17.6Bn Prev: 17.6Bn)
06:00 GMT - DE: Trade Balance (Aug) (Mkt: 15Bn Prev: 18.1Bn)
06:00 GMT - NO: GDP (Aug) (Mkt: 0.9% Prev: 0.4%)
12:30 GMT - CA: Unemployment (Sep) (Mkt: 6.9% Prev: 7.1%)
12:30 GMT - CA: Employment Change (Sep) (Mkt: 60K Prev: 90.2K)
12:30 GMT - US: U6 unemployment (Sep) (Prev: 8.8%)
12:30 GMT - US: Non-farm Payrolls (Sep) 4cast: 400K (Mkt: 500K Prev: 235K)
12:30 GMT - US: Unemployment (Sep) 4cast: 5.3% (Mkt: 5.1% Prev: 5.2%)
12:30 GMT - US: Average Hourly Earnings (Sep) 4cast: 0.5% (Mkt: 0.4% Prev: 0.6%)
12:30 GMT - US: Private Payrolls (Sep) 4cast: 400K (Mkt: 450K Prev: 243K)
14:00 GMT - US: Wholesale Inventories (Aug F) (Mkt: 1.2% Prev: 1.2%)
No Significant events