- US sells 5-year notes at 3.519% vs 3.519% WI
- Russian Putin: Current military – political situation is changing dynamically
- Hurricane Helene expected to make landfall in Florida on Thursday evening
- US crude oil inventories for the current week -4.471M versus -1.354M estimate
- US new home sales units for August 0.716M vs 0.700M estimate
Markets:
- Gold up $3 to $2659
- US 10-year yields up 4.9 bps to 3.78%
- WTI crude oil down $1.85 to $69.71
- S&P 500 down 0.2%
- USD leads, NZD lags
There was a dramatic intraday turn in the US dollar.
The euro rose to the highest since July at 1.1213 but then sank 90 pips in a grind lower. It was a similar story across the board as the US dollar broadly strengthened.
Some of that was angst with reports of Israel preparing to launch a ground invasion into Lebanon but it also reflected disappointment that China didn't deliver any real stimulus on the fiscal side to match the monetary moves this week. The market got ahead of itself in pricing in help after the mon pol announcements and so far it hasn't come.
That's pushed AUD/USD and NZD/USD back to pre-PBOC levels and led to heavy selling in oil markets. The pound was also hit hard by the reversal today, falling more than 100 pips from early US trade.
Fixed income continues to sell off as the market grapples with the US inflation picture in light of the Fed's more-dovish stance. Today's 5-year sale was solid, landing on the screws after a small concession. The question is what is the right level of rates in an economy that's weakening but with plenty of Fed ammunition. Tens are showing that 3.60% was too low, so now we'll test the upside.
Circling back to the dollar, flows may have been a factor as the quarter winds down. That's something to keep in mind in the remainder of the week.
