The minutes from the Fed’s August policy meeting were released overnight which showed that FOMC members are comfortable with the current course for inflation.
Added to this was the annual revisions to US non-farm payrolls, which confirmed market expectations that the Fed is likely to cut rates in September.
However, this didn’t feed into equity markets as most of this has already been priced in over recent days. The S&P 500 rose 0.4%, while the NASDAQ was 0.6% higher.
US treasury yields were down across the curve with the 2-year treasury yield falling 5 basis points to 3.93%, suggesting a Fed rate cut remains fully priced in for September. Market pricing suggests there are now almost four 25 basis point cuts priced in by year end.
Softer US rates markets led to more USD selling with the GBP jumping to a 12-month high of 1.3119, and the euro rallying to 1.1150.
The AUD remained supported but within recent ranges around the .6750 area.
Australian rates markets have now priced in a 95% chance of a rate cut this year, clearly at odds with the RBA’s guidance that there will be no move this year.
In commodities, crude oil markets were hit hard by algorithmic selling, sending them to 6-month low, West Texas futures are down 1.7% at US$71.93 per barrel and iron ore rose for the third day on some support from China, up 3.2% to $98.20.
