North American Summary and Highlights 25 September

North American session

Oil saw some slippage as talk on a potential deal to reopen the Strait of Hormuz continued saw a bit more detail, with Iran suggesting seven day roadmap, but the response from UST yields was limited, showing that worries in the bond market go well beyond oil, and that kept the USD response limited too.

Hammack was the latest Fed speaker to express a hawkish view, but from her it was no surprise. August durable goods orders were unchanged overall with a weaker than expected 0.3% rise ex transport, but non-defense capital orders ex aircraft with a 1.6% bounce suggested continued strength in business investment. September’s Michigan CSI saw a marginal upward revision to 48.1 from 47.8, but there was no revision to inflation expectations.

Slippage in USD/JPY found a base at 157. Gains in EUR/USD lost momentum around 1.14. EUR/GBP was supported by 0.86 while EUR/CHF found resistance around .945. AUD/USD and USD/CAD kept to tight ranges.

European session

USD/JPY sees some capping back after fast run, around - ½ % to 158~, as Japan FinMIn Katayama suggests Trump at UN side line talks expressed concern about the yen's weakness and suggested that an undervalued yen is problematic. Otherwise some current levelling out in the morning for bonds and dollar from rapid moves.

Cable steadies a little off the 1.32~ support. Recent comments last few sessions (Breeden, Lombardelli) hint of a November hike unless sudden energy backdrop change. Market pricing up to 70% now. That said, comments all frame it in context of current rates starting higher and a move rather than necessarily a cycle (“For me now, the question is: 'Do we need to do the first move?' Whether or not we need to do many more I think depends…”). BoE's Bailey speaking this morning offers a similar line, while noting subdued pass through and mortgage rates: 'We haven't increased Bank Rate. It's going to get harder to maintain that stance the longer we have high energy prices'.  

Brent off just under $2, though still well off its week lows, waiting for development. Suggestions that US-Iran are said to be exploring a phased deal but market many-times-bitten sceptical this is progressing fast, given Iran demands and apparent US lack of pre-election urgency. EZ M3 growth 3.5% from 3.4% (mkt 3.5%). German GfK consumer sentiment -30.6 from -26.8 (mkt -27.4).