September 23: Overnight Market Wrap

September 23: Overnight Market Wrap

Key Points:

US stocks close up on the day breaking 4 day losing streak

USD stronger again as DXY breaches 94.00

UK imposes stronger lockdown restrictions

Turnaround Tuesday raised its head once again and we saw a good bounce back in US stocks with green shoots across the board, Nasdaq as usual the biggest mover up 1.71% breaking a 4 day slump despite Tesla down over 5% . The USD however had other ideas. The usual correlation that has seen a weaker USD with a stock market rally didn’t come through and the DXY pushed higher above 94.00 as Powell’s commentary that the US economy was proving to be resilient helped. A likely poor worded comment from Evans stating that “we could start raising rates before we start averaging 2%” also raised some eyebrows and gave the USD a slight lift. The AUD underperformed after RBA’s DeBelle speech yesterday as markets digested the possibility of RBA cutting rates to 0.1% at October’s meeting, retail sales data today will add some colour to that thinking. BoE’s Bailey also spoke highlighting upcoming headwinds as the country moves back into lockdown and faces the ongoing Brexit saga. After falling to support at 1.2710 Cable then bounced to 1.2850 as he dismissed the idea that last week’s minutes meant that they were preparing for negative rates. USD strength and these highlighted concerns have seen the pair fall back to close at 1.2735. EUR fell to key support at 1.1690 closing at 1.1710 but with PMI data due for release today expected to be weaker it’s likely that we could see a retest of this support with some analysts eyeing a move towards 1.1500. Lagarde’s currency comments have also seen some spec longs take profit over the past day. RBNZ will give us their rate decision today expected unchanged but with further easing warranted after poor data recently. As mentioned Australian preliminary retail sales are also to be released so we could see some volatility in the session ahead.

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