European, Australian yields underperform
Bond yields globally are on a race to the bottom with European and Australian bond yields now falling faster than in the US.
US bond yields have seen further losses – the US ten-year bond yield fell from 4.17% to 4.11% overnight – but other markets are now reacting differently with US shares lower and the US dollar higher.
Overnight, the S&P 500 fell 0.4% while the Nasdaq lost 0.6%.
Potentially, markets have shifted from positivity around lower yields to worries about what falling interest rate expectations mean for economic growth.
Bond yields in Europe were notably lower overnight as markets price in rate cuts from the European Central Bank. In Europe, most currencies fell with the EUR/USD and GBP/USD down 0.3%.
The USD/JPY gained 0.1%.
The AUD/USD was flat after a disappointing September-quarter GDP reading – economic growth was reported at just 0.2% for the quarter (versus expectations for 0.4%). The Aussie ten-year bond yield fell from 4.42% to 4.23% yesterday.
China trade due
Chinese trade data is due today. With export growth somewhat improving to -3.4% y-o-y from -6.4% in October, we anticipate that exports will shrink at a slower rate in November.
In US dollars, import growth may pick up to 3.6% year-over-year in November from 3.0% in October.
This is mostly because of a low base and rising prices for several raw commodities, particularly iron ore still low in November.
US jobs the major release
US data will drive FX markets over the next 48 hours as we head towards the critical US non-farm payrolls due on Friday night.
On Wednesday, the ADP jobs missed forecasts, coming in at 103k versus the 131k forecast.
The relationship between the ADP jobs and non-farm payrolls has become less clear after the pandemic – in fact labor market data in general has become more difficult to decipher.
Partly, the large increase in government employment in the United States means that the non-farm payrolls are expected to be somewhat higher than the ADP series.
Aussie slips to bottom of the seven-day range
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 December
All times AEDT
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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.
