Global overview
US data continues to run hot with the stronger-than-expected JOLTS report signaling the US Fed will likely keep US rates higher for longer. The US ten-year bond yield hit new 16-year highs while the USD index climbed to new ten-month highs. The Aussie was the hardest hit after a little-changed RBA statement saw rate expectations ease.
Red-hot US jobs data upsets markets
Another strong data point from the US economy rocked markets overnight with a big jump in job openings providing further evidence of a running-hot US employment market.
The job openings and labor turnover survey (JOLTS) found 9.6m job openings available in August – well above the 8.8m expected.
The benchmark US ten-year bond yield surged from 4.68% to 4.80% while US shares tumbled. The S&P 500 fell 1.4%.
US data might remain strong in the short term. Tonight. the market expects ISM services to decrease by 0.9 points to 53.6 in September, but this key measure is likely to stay in the expansionary zone.
Although the service sector has been robust, regional surveys and the S&P services PMI have indicated that momentum may decelerate in September.
Aussie hit after RBA
The US dollar charged to new highs after the US data but a break above 150.00 in the USD/JPY saw the pair sharply reverse in what is speculated to have been, but not confirmed as, intervention from Japanese authorities.
The USD/JPY ended down 0.7% after initially falling as much as 2.5%.
The USD lost ground after the USD/JPY’s move with the EUR/USD and GBP/USD broadly flat.
The Australian dollar fell to new ten-month lows after yesterday’s Reserve Bank of Australia statement was mostly unchanged. The market was looking for new commentary to confirm market expectations for a rate hike next month.
According to market pricing from Refinitiv, the chance for rate hike in November fell from more than 50% before the decision to less than 30% after the decision.
RBNZ due
At today’s policy meeting, the Reserve Bank of New Zealand looks likely to announce its third straight on-hold decision.
At its last policy statement, in particular with its forecast adjustments, the RBNZ was slightly hawkish. Our assessment, however, was that the governor’s press conference communication was more balanced. In particular, we thought that the governor’s statement that the RBNZ was now in “wait, watch, and worry mode” did not strongly imply a policy bias.
Overall, we anticipate that the message delivered today will be relatively similar and mildly hawkish.
Two factors led to our expectations of the third straight on-hold decision: First, we anticipate the RBNZ will prefer to hold off until the September-quarter CPI reading, which is due on October 17. Second, the RBZ might decide against making a pre-election move since the general election is on 14 October.
The NZD/USD was also pressured yesterday ahead of today’s decision falling 0.6% to three-week lows.
USD hits new highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 2 – 6 October
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
