Forexlive Americas FX news wrap: When the AUDNZD is the biggest mover… | Forexlive

The day is ending with the AUDNZD neck in neck with the AUDGBP as the biggest mover today (both moved 1.26% on the day). When the AUDNZD is the big mover, it says something about the price action and the markets willingness to “play”. It seemed more of a day where flows were led by axes to grind in one currency pair or another vs. the economic or fundamental storylines. Technicals did play a part at times intraday, but overall there was a lot of ups and downs that was more random and “order driven” (or so it seemed).

The USD was mostly higher (despite lower yields) with the greenback higher vs the GBP, NZD and JPY. It was lower vs the AUD and near unchanged vs the EUR, CHF and CAD.

Fundamentally, the consumer confidence was better than expectations, but existing home sales were worse. Inflation expectations dipped but were still elevated at 6.7% vs. 7.1%. The present and expectations indices both moved up nicely with people less concerned about jobs which was interesting given the announced layoffs. Goes to show that lower gas price are a major driver for confidence.

Stocks moved higher for the 2nd consecutive day as traders gear up for the ubiquitous “Christmas Rally” (who knows if it will pan out or just a cute idea to latch onto). Yesterday, the 4 day decline was stopped. Today, the major indices rose from 1.5% to 1.6% (more or less).

Yields today were lower. The 2 year fell by -4.3 basis points to 4.223%. The 10 year was down -1.3 basis points to 3.671%. The US treasury auctioned off $12B of 20 year bonds with strong domestic and international demand. That helped the tone. If there was a concern that the overseas demand might not be as robust (especially after the BOJ surprise yesterday pushed up their domestic yields), it did not show up in the auction results today. The USDJPY rebounded today after the sharp declines seen yesterday.

The 2 year yield closed at 4.214% when the FOMC announced their decision on December 14 where they raised the terminal rate to 5.10%. The high yield for that part of the yield curve most tied to the Fed Funds rate reached 4.312% yesterday. The yield is back at 4.22% now. The treasury market is not buying into the Fed’s thought process of permanent inflaiton. A Bloomberg survey showed that the chance of a recession increased to 70% in 2023, up from around 35% 6 months ago (and up from 65% last month). The good news is the Fed officials have packed it in for the holiday’s (or so it seems). It might be best to be quiet for a while.

Crude oil moved higher today as crude oil inventories showed a larger than expected drawdown by -5894K vs -1657K estimate. That was bigger than the estimate from the private data released late yesterday. Crude is trading at $78.41 that is up about $2.20 on the day.

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