Data:
Wednesday:
- USD CB Consumer Confidence: Exp. 115.2 vs. 109.30
- FOMC Member Bostic Speaks (Federal Reserve Bank of Atlanta President Raphael Bostic)
AUDUSD Day’s Range: 0.72280 – 0.73111
Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen both warned that a U.S. default due to failure to raise the debt ceiling would have catastrophic consequences. Senate Republicans blocked an attempt by Democrats to raise the debt limit, causing concerns about whether partisan tension in Congress will impact the U.S. economy. The 10-year Treasuries railed 5 basis points to 1.54% and 30-year Treasuries jumped almost 10 basis points. The USD rallied to its highest level since November 2020 yesterday tracking the rise in Treasury yields as investors weigh the possibility of Fed reducing asses purchase in November and an interest rate hike likely to follow. Fed Chairman Powell admitted that inflation is broader, more structural, and more concerning than earlier this year, and the supply chain constraints are getting worse. Stricker inflation will add risks to the FX market, increasing demand for safe-haven currencies including USD, JPY, and CHF.
Investors are concerned about the rising risk aversion in the market in the upcoming days. The rising commodity prices such as natural gas, the likelihood of tightening monetary policy by the central banks, and the concern of U.S. government credit default, all these factors are causing concerns to the investors. Higher natural gas and oil price may also have an impact on inflation.
U.S. consumer confidence dropped to a seven-month low in September as the rising in COVID-19 cases causes concern about the economy’s short-term prospect, investors expect the growth to be a slowdown in the third quarter. The Conference Board said its consumer confidence index fell to 109.3 from the August reading of 115.2. The Commerce Department showed that the good trade deficit rose 0.9% in August at businesses imported more products to fill their inventories, another indication for a slower GDP growth expectation.
AUDUSD Daily Chart:
Major moves in the market:
Stocks
- The S&P 500 fell 2.04%, closed at 4352.63
- The Nasdaq Composite fell 2.89%, closed at 14546.68
- Australia’s S&P/ASX 200 Index dropped 1.47%, closed at 7275.606
Currencies
- The Japanese yen was at 111.50 per dollar
- The offshore yuan was at 6.4701 per dollar
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro traded at $1.1686
Bonds
- The yield on 10-year Treasuries advanced five basis points to 1.54%
Commodities
- Brent crude oil was at USD/Bbl 74.36
- Gold was at USD/OZ 1734.03
- Iron ore was at USD/T 119.89