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Markets:
- Gold down $3 to $2342
- US 10-year yields up 9.8 bps to 4.39%
- WTI crude down 19-cents to $80.64
- S&P 500 down 0.4%
- AUD leads, JPY lags
Friday was the final day of the quarter and that made drawing conclusions tough. It was especially difficult because the US political scene was thrown into disarray by Joe Biden’s poor debate performance.
Eyes were on the PCE report early and it showed some modest cooling, albeit with some wage pressure. The initial market moves were limited to 15 pips and it was the later UMich data that provided more of a jolt as the inflation readings in that report sagged. The dollar selling on both was short-lived though and it finished the day with only minor moves.
More dramatic was the selloff in bonds, that was steady and then accelerated late. The timing of the shift points to quarter-end flows but you could also weave an argument that a Republican rout and larger deficits are now more likely, as opposed to a split Congress. As for the politics, I’ll spare you the rest of the twists but it will be an interesting weekend between the efforts to push out Biden and Sunday’s vote in France.
Over in Japan, the yen sagged again despite the sacking of Kanda. The new top currency diplomat is Atsushi Mimura and my guess is that he will want to do something to establish credibility, which had evaporated under Kanda. Despite that USD/JPY rose on the day, though I’d be much more likely to point to US yields and French uncertainty for that.
Have a great weekend. Greg and Eamonn will be back next week.