US FX WRAP: Dollar rally intact on strong US data, a potential US diesel export ban, and more hawkish Fed speak
Newsquawk Staff ·
The dollar was firmer today, supported by sharp rises in global yields, stronger-than-expected US data, and growing economic pressure for Europe and APAC FX if the US goes ahead with a US diesel export ban. Additionally, further Fed speak pointed towards another hike, with Governor Barr noting that further rate hikes are likely needed to ensure a timely return to the 2% inflation target.
Concerning data, S&P Global Flash PMI for September was notably better than expected, with the composite index hitting a new five-year high, driven by a surge in business growth and acceleration in job gains; however, input costs saw their steepest increase in four years. US yields marched higher on the report, briefly extending on a poor US 5yr note auction that was met with the 2nd biggest tail on record.
Ahead, focus will remain on the diesel situation, in which Energy Secretary Wright has opposed a blanket ban on diesel exports, opting for a voluntary cap. Thereafter, reporting was mixed on whether the admin would go ahead. Additionally, Trump is set to meet with Xi on Thursday. Recent remarks from both sides suggest AI has been one of the main talking points. DXY hit highs of 101.231 alongside a new YTD high in US 2yr yields of 4.945% as money market place a ~70% chance of another 25bps rate hike at the Fed's October meeting.
G10 FX and EM's were all weighed by their own domestic concerns amid rising yields and likely greater downside risks to respective economies if the US goes ahead with a diesel export ban. Amongst the worst performers were those heavily reliant on energy imports (AUD, NZD, GBP, JPY). EUR was still pressured despite French and German PMI metrics showcasing a resilient European economy, despite the Iran war.
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