Morning Call Script - 29 Sept 2023
Overnight asset drivers & the impending data calendar
It's certainly been a while, but as is so often the case, we've had a more positive outlook on the final trading day of the month/quarter. USD softer led by AUD +63bps to 0.6457 and NZD +75bps to 0.6004. Reversal in yields (US10s down from 4.688% to sub 4.6%) and a small give back for oil has left a tiny window of consolidation / risk on as we head towards the main rebalancing windows in global assets for the quarter. Wed's Corp t+2 session has marked a short-term nadir for the USD, as consensus gushed long usd, paid rates, short equities.
Overnight News/Data: Tokyo Core CPI YoY was softer than expected at 2.5% (exp 2.6%) and down from prior 2.8%. This has supported the narrative of the BoJ in wait and see mode before they do anymore tightening. Furthermore, they announced an unscheduled bond buying operation overnight, leaving JPY as a laggard to the broader USD weakness (149.25).
This afternoon we get the Fed's favourite inflation number Core PCE, with economists expecting it to drop sub 4% for the first time in 2 years. If inline or even softer, the "disinflation" story may reappear and support a deeper squeeze / pullback for USD longs and a potential rally in duration. However, as our friends at MacroVisor point out, why lend to a US government (heading into shutdown) for 30yrs at a lower rate than you're willing to lend to them for 30days... any rally in yield maybe short lived.
US Debt Ceiling: Bipartisan Senate bill got the votes to pass, as expected ... leaving it in the court of McCarthy and the House... (AP: McCarthy rejects Senate spending bill while scrambling for a House plan that averts a shutdown
Detroit Lions 34 vs 20 Green Bay Packers... big statement win for this young lions team at Lambeau (NFL.com)
Have a great day, and keep smiling!
UBS Washington Weekly Podcast: Government shutdown update, GOP debate takeaways
GBP (07:00): UK Q2 GDP Final
EUR (08:45): ECB's Lagarde
EUR (10:00): Eurozone Inflation Report for September... exp to fall from 4.5% in Sept from 5.2% in August. Following the fall in German inflation to the lowest level since the Ukraine war
USD (13:30): PCE price Index
CAD (13:30): GDP MoM Prel for Aug
USD (14:45): Chicago PMI
USD (15:00): University of Michigan Sentiment
USD (17:45): Fed Williams
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