Solid 7-Year Note Auction Eases Bond Demand Concerns

Last night’s 7-year bond auction provided some relief as it showcased the strongest bid-to-cover ratio in three years, coupled with remarkably low forced dealer buying at just 11%. This successful auction has alleviated some of the concerns surrounding bond demand, particularly considering the significant amount of issuance.

Amazon and Intel’s Positive Guidance Boosts Equities

Encouraging guidance from tech giants Amazon (+5%) and Intel (+7%) has injected a dose of optimism into the equity market. This positive news marks a departure from earlier disappointments seen with Google and Meta’s earnings earlier in the week, providing a boost to equity sentiment.

DXY Faces Challenges as Attention Shifts to US PCE Data

The DXY (U.S. Dollar Index) is encountering difficulties in maintaining recent highs. All eyes are now turning toward today’s US PCE data, which is expected to be the next driver of dollar dynamics. It’s worth noting that today being corporate month-end may see an uptick in USD demand as we approach the London Fix (4 PM UK time).

AUD Rises on Strong PPI Data

Among major currencies, the Australian Dollar (AUD) is currently the strongest performer following robust Producer Price Index (PPI) data. With expectations of an RBA rate hike approaching 60%, today’s hot PPI data, following earlier robust CPI figures, suggests that the AUD may be undervalued.

In FX Today

The AUD leads the way among major currencies after an impressive beat on PPI data earlier today, while the Swiss Franc (CHF) lags behind. The exact catalyst for the CHF’s weakness remains unclear at this stage.

US PCE Data: Today’s Main Event

Today’s key event in the data calendar is the release of US Personal Consumption Expenditures (PCE) data. While this is the Federal Reserve’s preferred measure of inflation, it typically lacks the same level of market-induced volatility as the Consumer Price Index (CPI). However, should the data unveil a significant surprise, it has the potential to move markets. In terms of tradeability, a substantial miss across the board appears to be the most appealing scenario. Such an outcome could prompt a decline in Treasury yields and potentially force over-extended USD bulls to reassess their positions, offering an attractive risk-to-reward opportunity.
As always, we keep a close watch on these developments and provide timely updates to help you navigate the ever-changing financial landscape.

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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