AUD/USD Feeling Bullish Again Today as Sentiment Improves
AUD/USD has made a strong reversal higher in the US session today, as risk sentiment improves in financial markets and US bond yields turn lower. Moody’s outlook deterioration last Friday of US sovereign dent didn’t affect markets too much today
Moody’s outlook for the United States’ sovereign rating was lowered from stable to negative after the market closed on Friday last week. That does not guarantee a downgrade, but it is a step in that way, although there was not much impact in the USD today. However, given that the US has already been downgraded by S&P and Fitch in previous months, the action comes as no surprise.
The US 10-year Treasury yields surged to 4 basis points to 4.70% which bolstered the USD, but stopped there and made a swift reversal in the last two hours, giving back all the gains. The lack of reaction shows that the Fitch downgrading in August was not a major factor in the subsequent bond sell-off. Most people understand the problem with the US debt and know that it’s an issue.
The larger events are debt auction sizes increasing and buyer hunger decreasing. The fallout from last week’s dismal 30-year bond sale is still being felt, with some blaming it on a ransomware attack at ICBC. We’ll have to wait about a month to put that notion to the test.
Major indices were positive for the 2nd week in a row last week and each of the major indices all closed back above their 100 day MAs (and the highest of the 50 and 200 day MAs), which is a bullish sign. The AUD is the strongest currency today, while the CHF is the weakest.
The AUD has benefited from upbeat comments made by the RBA As. Governor Glenn Stevens earlier this morning. The Assistant Governor stated that the route to reducing inflationary pressures in Australia may be more difficult than anticipated. In Australia, as in the United States, a tight labor market has been a major driver to high inflation. As investors await new data, money markets have maintained the door open for another interest rate rise in 2024 (refer to table below).
AUD/USD Live Chart
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