September 17: Overnight Market Wrap

September 17: Overnight Market Wrap

Key Points:

Powell outlines ‘powerful forward guidance’

US retail sales disappoints at 0.6% from 1.0% expected

USD strengthens as US 10 year yields tick higher

The FOMC came and went with little fanfare overall, the prior US retail sales release affecting volatility more as data printed 0.6% from 1.0% expected. Powell highlighted ‘very powerful guidance’ being delivered but markets didn’t seem convinced throwing questions around the Fed’s credibility and hence the weight on risk assets. Ruling out any rate rises until end of 2023 and keeping the pressure on the government to maintain fiscal stimulus the response was muted with USD strength taking place ahead of the meeting, stocks moving after. The Dow Jones eked out a tiny gain but S&P500 and more so the Nasdaq fell on the day whilst the USD was mixed and the DXY closed unchanged at 93.12. USD/JPY remained under pressure despite US yields creeping up slightly but elsewhere we saw USD strength against the commodity bloc with AUD capping at 0.7340 and USD/CAD finding support at 1.3125/30 once again before falling back on the day as risk turned lower. Gold once again hit highs above $1970 but was unable to move further and fell back in line with other currencies closing at $1958. The EUR peaked once again at 1.1880 before falling away by 100 pips before closing just above 1.1800. Cable recovered from recent weakness touching above 1.30 briefly. EUR/GBP fell a big figure on the day. External pressure on the UK government by Biden for the ‘Good Friday’ agreement to be observed in any challenge to the current Brexit deal has maybe helped the pound in the hope that a ‘no-deal Brexit’ remains unlikely. With no real catalyst, WTI rallied over 5% against the risk move to close above $40 once again having little effect on the CAD. Todays Asian session will bring the focus back to Australian jobs data with expectations of -50K and an unemployment rate between 7.7-8% with Victoria on lockdown for the past 6 weeks impacting. The BoE and BoJ will announce rate decisions with eyes on the BoE vote as to the possibility of lower rates. The BoJ is unlikely to have any impact. Tonight is topped off with US weekly jobless claims so expect some bouts of volatility during the course of the day.

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