Market wrap: currencies range bound, dollar mostly unchanged - Westpac

Analysts at Westpac's market wrap...

Key Quotes:

"Global market sentiment: US equities made fresh record highs at month end. Bond yields rose amid mixed economic data and reports that Trump had met a candidate for the Fed Chair.

Interest rates: US 10yr yields initially dipped from 2.32% to 2.29%, following the disappointing PCE deflator data, but then rose to 2.34% after stronger data (Chicago PMI) and reports that Trump had met with Fed Chair candidate Warsh (who some consider slightly more hawkish than incumbent Yellen). Fed fund futures yields continued to price the chance of a December rate hike at 76%.

Currencies: The US dollar index was little changed on the day, and most currencies were rangebound. EUR ranged sideways between 1.1790 and 1.1835. USD/JPY ranged between 112.20 and 112.75. AUD ranged between 0.7817 and 0.7854. NZD ranged between 0.7204 and 0.7244. AUD/NZD ranged between 1.0830 and 1.0875, iron ore’s recent fall (-1.3% on Fri, -21% in Sep) a headwind.

Economic Wrap

US personal spending rose 0.1% in Aug (as expected). The core PCE deflator, a measure of inflation favoured by the Fed, was weaker than expected at 0.2%, for a 1.3% annual pace (vs 1.3% expected). Chicago PMI jumped from 58.9 to 95.3 (vs 95.1 expected), the second highest reading since 2014. The key components all rose. Consumer sentiment (Univ. Michigan) slipped from 95.3 to 95.1 (95.3 expected).

FOMC member Harker said labour markets felt “really tight”, and there were signs of upward wage pressure.

China manufacturing PMIs were released, the official measure rising from 51.7 to 52.4 (vs 51.6 expected), and the Caixin version slipping from 51.6 to 51.5 (51.0 expected).

BoE Governor Carney said during a BBC interview: “…what we have said, that if the economy continues on the track that it's been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat”. Markets consider the November meeting a possibility."