Headlines:
- USD/JPY continues march higher with key resistance still some distance away
- RBA raises cash rate by 50 bps to 2.35%, as expected
- RBA plays it straight, hints that rates are now in neutral territory
- UK PM Truss reportedly plans to freeze household energy bills for 18 months
- Italy plans to cut gas consumption amid energy crunch
- Germany July industrial orders -1.1% vs -0.5% m/m expected
Markets:
- GBP leads, JPY lags on the day
- European equities higher; S&P 500 futures up 0.6%
- US 10-year yields up 7 bps to 3.26%
- Gold up 0.1% to $1,712.03
- WTI crude down 0.2% to $86.70
- Bitcoin up 0.8% to $19,899
The dollar continues to sit in a comfortable spot as we await the return of Wall Street from the long weekend. Treasury yields are higher and that is underpinning USD/JPY as the pair pushes to fresh highs since 1998, breaching 142.00 currently - up over 1% on the day.
Things are continuing to stay in place for the dollar as the factors that have driven the move since August are still playing out. EUR/USD rose initially to 0.9985 only to fall back to flat levels now around 0.9925 as the euro is still sluggish amid the energy crisis in the region. GBP/USD is hopeful about new UK PM, Liz Truss' efforts to tackle soaring energy prices but I would argue that it is but a false dawn for the quid, with cable nudging up to 1.1600 before keeping around 1.1570 on the day - off two-year lows from yesterday.
Meanwhile, China is slowly guiding the yuan to weaken towards 7.00 against the dollar - in which I would expect them to draw a hard line there after having cut the FX reserve ratio yesterday. USD/CNY touched 6.96 today, which is its highest level in two years.
Elsewhere, the antipodeans are struggling with AUD/USD down 0.4% to 0.6765 after the RBA played it straight and hiked the cash rate by 50 bps to 2.35%, as expected. The central bank hinted at rates being at neutral territory but offered no additional hawkishness as they are very much just a passenger now to the Fed's tightening drive.