Aussie bashed further on more RBA jawboning
The Aussie sell-off had stalled a bit yesterday and the currency was only dragged a bit lower later in the session on an ugly late session in US equities before more RBA jawboning overnight dragged the currency a bit lower still. The RBA’s Kent claimed in an interview that there is further room to “compress” rates and said he wouldn’t be surprised if the shortest rates dipped below zero at some point. This has the market pricing nearly zero rates at the November RBA meeting (implied rate at 4.4 bps – so some seeing a cut from the current 0.25% to 0.10% while others lean for a full ZIRP.) Were the Chinese yuan not setting nearly daily highs against the US dollar, the AUD would surely be lower – it is definitely a factor in the mix.
US stimulus deadline supposedly up today.
Not much to add on the US stimulus front save for the fact that a definitive headline either way may be on the way and move markets considerably over the next 12-18 hours (today is House Speaker Pelosi’s deadline for a deal if something to be passed before the election). The most confusing aspect is perhaps less whether House Speaker Pelosi and Treasury Secretary Mnuchin can come to terms, but more whether Senate Republicans are willing to sign for a larger deal Trump seems willing to do as they may be burning bridges to Trump in anticipation of a thumping for their party at the election. A no-go on stimulus ´would likely support the USD and JPY and weaken risk sentiment.
Euro resilience despite ugly Covid-19 news flow.
The firm euro today is a tough one to wrap our heads around unless it is the news of the massive interest in the first proper join EU bond issue, which was said to be massively over-subscribed today. On the negative side, Covid-19 numbers in Europe are terrible as we await the flash PMI numbers for October on Friday. New virus-linked restrictions include a total shutdown in Ireland at the highest Level 5 severity, with people essentially told to shelter in place. German Bund yields have been driven to their lowest level in recent days since the worst week around the March Covid-19 linked market meltdown.
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