The US dollar is up off the floor as US stocks give back some gains. Tomorrow is the final day of August so month-end flows have likely been a factor this week and Credit Agricole earlier in the week suggested there would be some USD buying.
At one point stocks had given back all their gains but they’ve since steadied with the S&P 500 up 0.4%.
USD/JPY has been strong as yields chop near unchanged on the day.
USDJPY 10 mins
I continue to think that the bond market is in charge here and that yields are headed lower. I hardly think it’s controversial to anticipate weakness in the US economy as the debate largely centers around how substantial the weakness might be. US 10s are flat today at 4.12%.
“One might be tempted to suggest it will take a far more disappointing jobs update to break 10-year yields back into 3-handle territory, although the bias toward lower yields already demonstrated could take on a momentum all its own as even as +150k payrolls growth would be consistent with the delayed impact of prior hikes finally filtering through to the real economy,” writes BMO today.
There is some talk about r-star and pricing in a lower terminal rate. A Reuters reporter asked me about it today but I don’t think it’s a compelling driver.
