EUR/USD, GBP/USD, NZD/USD flows - Fed's Warsh avoids any nudges, leaves yields/dollar off highs
Warsh avoids forward guidance
Lack of verbal intervention leaves mkt comfortable with low Oct pricing, and the dollar still modestly correcting
Indonesia moves individually on MSCI jolt
Fed’s Warsh in forward-guidance-lite mode, saying he doesn’t prejudge meetings and he doesn’t ‘believe in saying now what I might do at the meetings that we have in the balance of this year’. That absence may perhaps still be read into (rightly or wrongly), as suggesting he felt no need to nudge markets – his one departure from neutrality did come ahead of the Sep hike after all.
Otherwise, Warsh stuck to general remarks about ‘tailwinds’ that are giving strength some durability, and on the common IMF-wide view in terms of surprise over global economy ‘hanging in there’ and on inflation as a ‘common challenge’. Oct hike odds remain back at pre-CPI levels, and with US bonds trading a tight little changed session.
That keeps the dollar in modest overbought correction mode, EUR/USD having tested to 1.1240~ and GBP/USD back above 1.33. Antipodeans also showing better bounces out of Warsh’s no-signal, even with the hit to AUD yesterday on the employment report. NZD/USD trying to lift of the test of the base through 0.56, with a high just through 0.5650. RBNZ’s Conway suggested yesterday the Oct decision was completely open, the OCR most likely to rise but not decided on timing.
Elsewhere, mainly an individual regional issue rather than any wider major spillover, but MSCI signalled that Indonesia would be removed from the EM index and moved to standalone status – JKSE off around 14%, and USD/IDR up 0.6%. Wider regional sentiment steadier on the day.