Market wrap: Republican tax reform plan released, DXY down - 0.1% - Westpac
|Analysts at Westpac offered a market wrap.
Key Quotes:
"Global market sentiment: US equities, bond yields and the US dollar fell slightly in response to the Republican tax reform plan. The BOE hiked but the GBP fell in response. Powell was announced as the next Fed Chair.
Interest rates: US 10yr treasury yields fell from 2.36% to 2.33% after the tax plan was announced. Fed fund futures yields continued to price the chance of a December rate hike at 98%.
Currencies: The US dollar index was volatile, falling after the tax plan but recovering later to be down 0.1% on the day. EUR rose from 1.1630 to 1.1690. GBP was the day’s underperformer, falling after the BOE rate hike from 1.3240 to 1.3043, indicating the market was expecting a more hawkish outlook. USD/JPY traded around 114.10 apart from a temporary dip to 113.54 post-US tax plan. Outperformer AUD preserved earlier data-related gains, nudging higher to 0.7730. NZD ranged between 0.6890 and 0.6935. AUD/NZD ground slightly higher from 1.1130 to 1.1170.
Economic Wrap
US non-farm productivity rose 3.0% in Q3 (vs 2.6% expected), tracking the increase in GDP growth. Unit labour costs rose 0.5% in Q3 (vs 0.4% expected).
Powell and Dudley both warned Libor may eventually be replaced as an interest rate benchmark, but there were no monetary policy comments. Several media channels yesterday reported “sources” saying that Powell would be confirmed as the new Fed Chair at 3pm NY time.
Hot off the press, Jerome Powell has just been announced by Pres. Trump as the next Fed Chair.
The Bank of England increased its policy rate by 25bp to 0.50%, its first shift since the Brexit-related 25bp cut in 2016. The vote was 7-2, Cuncliffe and Ramsden dissenting. There was no change to the asset purchase program. Projections for the policy rate rising to 1.00% by the end of 2020 were less hawkish than the market was expecting, causing a fall in the GBP and market interest rates."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.