Despite a break from the incessant waves of US dollar selling, there remains a skittish overtone in the currency markets as the fear of the unknown sets in, with US political uncertainty accentuating the current market unease. Treasuries traded down after a consensus PCE, but market sentiment quickly shifted, driving prices up and yields down, as the market again emphasizes the US political morass.
The US political crater and lack of fiscal stimulus from Washington will continue to be the primary catalyst for dollar declines. While the market is cautious about a possible USD risk reversal, searching for the key triggers is like looking for a black cat in a coal cellar.
US economic data had little impact on the December rate hike probabilities. But the fact remains, investors believe the current political tumult in Washington will lessen the chances of another Federal Reserve rate hike in 2017.
The perpetual oil price roller coaster is adding to market jitters as WTI dropped 2.0% today on a Reuters report that OPEC production rose in July. Adding more fuel to the fire was the increase in US crude inventories reported by the American Petroleum Association at the end the NY session.
Equities, on the other hand, continue to flourish as earnings reports drive stocks to new highs. The Dow reached a new-all time high for a fifth consecutive session, nibbling at the key 22k mark.
Euro
The euro has traded marginally lower overnight, but for the most part has been trading sideways. The position overhang from month-end activity, with US payrolls around the corner, has dealers adopting a more cautious tack as they look for more clues amidst the foggy US economic and political landscape.
Australian Dollar
While there was nothing particularly dovish in the RBA statement, there was also nothing that screamed AUD higher other than USD weakness. The Aussie has plunged lower overnight as the market is inferring that, provided the currency remains elevated, the RBA stays in the low-interest rate for the longer mode.
Japanese Yen
Very choppy session overnight as the greenback traded with mixed sentiment versus the yen. There was little news behind the overnight currency moves other than to speculate it's a bout of nervous position nellies in summer thinned trading condition.