In case you missed the news earlier, Fitch moved to downgrade the US credit rating from AAA to AA+ here. It is the first of such big news since 12 years ago when Standard and Poor's did the same. Here's the market reaction so far:
- S&P 500 futures -0.5%
- US 10-year yields down 1 bps to 4.037%
- USD/JPY down 0.2% to 143.00
- EUR/USD flat at 1.0981
As you can see, it's a rather muted reaction in FX as the dollar is little changed in general. Instead, Asian equities are the ones being beaten down the most with the Nikkei down over 2% on the day and the Hang Seng also seeing similar losses.
That is translating to a bit more caution, with a lower Chinese yuan proving to be a drag on the aussie and kiwi currencies as well. AUD/USD is down 0.5% to 0.6580, trading down to fresh two-month lows.
I shared some added thoughts on all this here. But the way I see it, markets will keep the focus on this news for now but it may all be forgotten once we get to the ADP employment data later today and if not, surely by the time we get to the US non-farm payrolls on Friday.
Looking to the session ahead, there won't be much else to work with so the caution we are seeing is likely to stay the course at least until US traders step in later.
0700 GMT - Switzerland Q3 consumer confidence
0730 GMT - Switzerland July manufacturing PMI
1100 GMT - US MBA mortgage applications w.e. 28 July
That's all for the session ahead. I wish you all the best of the days to come and good luck with your trading! Stay safe out there.