Citi

USD held steady in the G10 space and traded mixed against the EM space following Clarida’s hawkish comments overnight and mixed results on ADP and ISM. USDTHB traded higher to 33.170 level after a more dovish-than-expected BoT outcome yesterday where policymakers lowered GDP forecast on the back of rising covid cases and deteriorating growth expectations. Elsewhere, oil advanced to $68.3 a barrel amid tensions in the Middle East. Looking ahead, BOE meeting is due today and markets expects MPC to hold policy steady.

Credit Agricole

Asia overnight: In Asian hours risk sentiment was stable with US stock futures trading slightly higher at the time of writing. At the same time the USD has been holding on to most of its recent gains, mainly against lower yielders such as EUR, CHF and JPY. This is mostly driven by a combination of better-than-expected services sector[1]related business activity and Fed Vice Clarida suggesting that conditions for rate lift off by the end of 2022 could be met and that tapering may be on the cards as early as by the end of this year. As long as growth data continues to paint a more constructive picture, more supported monetary policy expectations should fail to dampen risk sentiment more meaningfully. Elsewhere, the risk sensitive AUD has been among the outperformers, mostly driven by Australia posting a record trade surplus.

BNZ

Overnight US economic data and comments by Fed vice[1]chair Clarida caused a bumpy ride for US Treasuries, with little net change in the 10-year rate overall. Some modest USD strength overnight has been evident, although the NZD has managed to hold onto its gains seen yesterday after the very strong labour market prints and lift in domestic rates across the curve.

FX: In currency markets the USD was on the soft side until the strong ISM services print and Clarida’s remarks got the market’s attention and sent it higher. Net movements have been small and the BBDXY index is up just 0.2% for the day. The NZD enjoyed strong support after the NZ labour market reports were released (see below) and traded up to an overnight high of 0.7089. Post the USD rebound, the NZD has since retreated back to 0.7050, little changed from the NZ close, but reinforcing the 0.71 level as a mark as technical resistance. Being the strongest major for the day and holding its own against the USD overnight, NZD crosses are all higher. NZD/AUD has steadily risen up to 0.9550. JPY has been the weakest of the majors, seeing NZD/JPY up 0.9% for the day to 77.2.