AUD: AUD/USD - Finds Buyers Towards 0.6500 As The USD Move Stalls
Sep-28 22:16
The AUD/USD had a range overnight of 0.6521-0.6552, Asia is trading around 0.6550. US stocks found some support and the USD’s bout of strength stalled as the data on Friday came in as expected. The AUD found some demand back towards the 0.6500 area and is trying to bounce. Price is back in the range and the market will be turning its attention towards Fridays Payroll number if it is released. The AUD outperformance continues to be better expressed in the crosses for the time being.
- MNI RBA WATCH: On Hold, Eyeing Further Labour, CPI Data. The Reserve Bank of Australia board is likely to hold the cash rate at 3.6% tomorrow as it considers the floor of its easing cycle and awaits clearer signals on inflation and labour market tightness, making a November cut a possibility. Former RBA officials argue that a tight labour market, weak productivity, and strong wage growth could limit the Bank to just one or two more cuts, with the risk tilted toward one. They agree labour market performance will be central to the Bank’s next steps.
- Bloomberg - “Trump will meet the top four congressional leaders at the White House Monday as an Oct. 1 shutdown looms. The US will still continue to collect tariff revenue and pursue its immigration crackdown if the government closes.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD405m), 0.6625(AUD1.29b), 0.6725(AUD1.19b). Upcoming Close Strikes : 0.6600(AUD943m Oct 1), 0.6600(AUD1.57b Oct 2), 0.6700(AUD1.64b Oct 1) - BBG
- CFTC Data last week shows Asset managers added back to their recently reduced shorts, -48580(Last -41095). The Leveraged community did likewise, -6358(Last -1519).
Fig 1: AUD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
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RATINGS: S&P Upgrades Portugal To A+ From A
Aug-29 20:28
S&P has upgraded Portugal's long-term credit rating to A+ from A, with a stable outlook (had been positive).
- This is the 7th S&P upgrade for Portugal, from a low of BB in 2012-15. Only four ratings are higher (AA-, AA, AA+, AAA). This is the same rating as Slovakia, and just above Spain (A) per S&P.
- Per Bloomberg: "*S&PGR UPGRADES PORTUGAL TO 'A+' ON LOWER DEBT; OUTLOOK STABLE"
STIR: Still Eyeing September And December Cuts
Aug-29 20:16
With few market-moving data points this week, implied Fed rate cuts essentially held onto their post-Jackson Hole upward repricing, adding a couple of basis points of easing for good measure heading into the Labor day weekend.
- Indeed, the lack of movement is somewhat remarkable given this week's extraordinary "firing" of Fed Governor Cook, which is currently being fought out in the courts. In all it probably added to the dovish tone on the near-term rate outlook post-Jackson Hole but not substantially so, at least so far.
- The current path sees a September rate cut priced with nearly 90% implied probability, with 56bp of cuts through end-year (a cumulatively priced second cut in December) and 83bp through March 2026 (3+ cuts).
MACRO ANALYSIS: MNI US Macro Weekly: One Week, Two Labor Days
Aug-29 20:10
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- A busy pre-holiday week for data brought mixed economic signals and little net change in Fed easing expectations, putting next week’s labor day – Friday with its nonfarm payrolls report, of course, with apologies to Monday’s federal holiday – in focus for the FOMC and market participants alike.
- Second-quarter GDP was revised up by more than expected in the second reading, to 3.3% Q/Q SAAR, driven by better-than-previously estimated domestic demand but still leaving 1st half growth in slightly weaker territory vs last year. That said, the Atlanta Fed's Q3 GDPNow estimate jumped to 3.47% (though the implied contribution from net exports in the quarter looks somewhat dubious, as we explain).
- The other major release of the week was July's Personal Income and Outlays report, which showed a modest uptick in income and spending on the month. However, the broader trends remain mixed at best, as real disposable income growth remains soft and services consumption is failing to regain traction.
- Core PCE inflation was close to expectations in July as the Y/Y accelerated to 2.9% for its fastest since February as it moves further away from recent lows of 2.6% having stalled above the 2% target. Recent trend rates are a little hotter but the median FOMC member will still need to see a further acceleration to meet their 4Q25 forecasts from June.
- Labor data were mixed. Latest jobless claims were in line to slightly better than expected, with initial claims trending a little higher but still impressively low whilst continuing claims are broadly plateauing after sharper increases in 1H25. But within the Conference Board consumer survey, the labor differential edged lower again, suggesting a continued upward trend in the unemployment rate.
- Elsewhere: regional Fed activity surveys were individually mixed, but combined generally showed an improvement in both manufacturing and services activity albeit with continued upside price pressures.
- Consumer sentiment (UMichigan and Conference Board surveys) and housing activity remained soft.
- Apart from Gov Waller again making the case from rate cuts, other FOMC colleagues who commented this week were a little more guarded when it came to the need for easing, to our ear.
