Yields on US treasuries continued to climb higher yesterday causing USD to gain further, with GBPUSD and EURUSD falling back down to the lows seen in March this year. The reason for the move was higher-than-expected ISM and S&P manufacturing numbers from the US, which now suggests that we could see annualised growth for third quarter this year close to 4%. UK manufacturing PMIs came in slightly higher than expected earlier in the day, and the European numbers in line with expectations.
* Daily move - against G10 rates at 7:30am, 03.10.23
** Indicative rates - interbank rates at 7:30am, 03.10.23
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USD continued to gain overnight on risk aversion with Asian equities all finishing lower, as well as hawkish comments on further rate hikes being necessary by Fed members Mester and Bowman. The first set of US job numbers are due today with the JOLTS job opening data set to suggest a minor revision lower in August from July to 8,808,000. The USD pushed on yesterday - with another solid set of figures today it seems these moves will continue, sending GBPUSD and EURUSD even lower.
GBP is down across the board this morning after the British Retail Consortium reported that shop price inflation eased to the lowest in a year to 6.2% in September, down from 6.9% in August. Further declines are expected for the rest of the year, which adds to the argument that the BoE is done with hiking rates. Negative for GBP given that markets are still pricing in a 60% chance of a rate hike in December.
No surprises by the RBA, with the central bank electing to keep interest rates at 4.1% in Australia. The comments afterwards were similar to last monetary policy meeting, in that the Bank suggest “further tightening could be needed to ensure inflation is returned to target”. AUD is weaker as a result.
The dollar's dominance seems unyielding now, with US treasury yields continuing to climb and markets remaining cautious and risk averse. The November highs are the next target now on the USD index.
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