Analysts at ANZ Bank New Zealand Limited, (ANZ), explained that risk assets and bonds were firmer as USD consolidated with a slightly weaker tone as the London afternoon progressed in what was very much a summer holiday market.
Key Quotes:
“There were no data releases of note, but reports that Trump allegedly made comments at a fundraiser about being disappointed with Powell raising interest rates reminded the market of comments a few weeks ago. Fixed income, nonetheless, was firm suggesting there is still safe-haven demand around despite the better tone to equities. The US yield curve flattened, with the 10-year down 4bps to 2.82% and 2-year down 2bps to 2.59%. The S&P was up 0.3% at the time of writing, the DAX rose 1.0% and the FTSE was up 0.4%. WTI lifted 0.8% and gold rose 1.0%, but remains below $1,200/oz.”
Trump allegedly voiced concern over rising US interest rates
“Trump once again allegedly voiced concern over rising US interest rates, stating he had expected Fed Chair Jerome Powell to be a cheap-money Federal Reserve chairman.
While Trump’s displeasure for rising interest rates is nothing new, and the Fed maintains full operational independence (something the White House has previously confirmed that Trump respects), markets remain attentive to such comments. USD weakened, with the Dollar Index down 0.2%. The Fed has lifted the fed funds rate five times since Trump became President, with two more pencilled in by the end of 2018 (market pricing suggests a little over 75% probability). At a target range of 1.75 to 2%, the funds rate is estimated to be around 1%pt from neutral.”
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