North American Summary and Highlights 2 September
Overview - The USD slipped led by USD/JPY and a more hawkish than expected Bank of Canada.
North American session
The USD slipped in North America largely on a sharp fall in USD/JPY from around 159.60 to near 158.60, before a correction to near 159. Intervention does not appear to have been confirmed. EUR/GBP was slightly firmer.
USD/CAD fell from above 1.39 to below 1.3850. The Bank of Canada left rates unchanged but expressed greater concern on inflation, particularly in the press conference. AUD/CAD reversed to 0.9920 after peaking near 0.9960. AUD/USD advanced to 0.7170 then stabilized.
A 38k increase in the August ADP employment report was on the weak side of expectations. Fed’s Williams did not sound hawkish, downplaying inflation worries, but noncommittal on September’s decision. The Fed Beige Book was similar to the last one on July 15, if slightly softer.
European session
Bonds pressure and some (albeit currently modest) spillover to risk still a big focal point. US10s continue to inch out, clearing 4.8%, with the same elsewhere, JP10s holding a break above 3%. Bunds also off half a point today for example and the Dax -0.8%.
Interesting price action on the yen stands out, USD/JPY selling back from the 160.40 test back to the 159.40 hourly support but in fairly controlled intraday selling fashion (started by export sales?). Comments from Ueda and board member Takata support view hike on Sep meeting agenda, odds currently at 75%.
As well as some possible risk aversion support and maybe even local bond support, there’s also signs of some renewed carry leg switching to CHF after a breather, with CHF/JPY off 2 figures in a few days. EUR/CHF out to new 1yr highs also. CHF is the last of the low yielders (and ZIRPs in fact) and that transition is speeding up.
NZD continues to see heavy sell-the-fact out of the RBNZ hike given the somewhat less hawkish tone and on ongoing positional selling (NZD/USD has been on a slide since testing and rejecting the post-Mar 0.60~ tops a week or so ago. Break of 0.59 and then .50 on the way down adding to the squaring with the low just above 0.58. Risk sentiment not helpful either of course (and SEK to a smaller extent on the day).