Forex today: dollar and rates lifted on hawkish Fed chat/positive US data and gold extends the slide

Forex today had the dollar up by 0.6% while the US 10yr yields rose from 2.32% to 2.36 and 2yr yields from 1.47% to 1.50%. 

US data continued to print better than expected, lifting the dollar to a two-month high having traded between a range of 93.410 - 93.990.

US Durable goods orders for August were finalised at +2.0% (vs 1.7% expected) while the US factory orders rose 1.2% in August (vs 1.0% expected), with data less affected by the hurricanes than what had been anticipated previously.  

We also had Fed speakers Williams and Harker early then George late. All were upbeat on the outlook for the US economy and said roughly the same thing, that the outlook warranted one more hike this year and another three to follow in 2018. The Fed fund futures yields firmed slightly to price the chance of a December rate hike at 84%.  In Washington, The House of Representatives passed the budget on to Senate, paving the way for tax cuts by a simple majority vote, also underpinning the dollar and Wall Street.

The euro was falling from 1.1780 to 1.1700, although remains potentially overvalued given the Catalan revolt that has been widely ignored by the FX space, with markets expecting a resolution sooner than later, the risks thus potentially are underestimated at this time. GBP/USD was hammered from 1.3249-1.3107 after Tory MPs were calling for May to resign in wake of a terrible party conference speech:

"May’s bid to reassert her dwindling authority was ruined on Wednesday when her keynote speech was interrupted by repeated coughing fits, a prankster, and even letters of her slogan falling off the set behind her," - Reuters.

USD/JPY rallied to 112.92, still unable to cross the 113 line and hold bids on the handle. 

The commodity bloc was hurt, (besides copper that rallied into bull leg after three-week consolidation), on a resurgence in the greenback, with the antipodeans and higher beta feeling the strain. AUD fell further in an extension of the disappointing retail sales data, falling from 0.7840 to 0.7792. The Kiwi dropped from 0.7160 to 0.7113 to a four-month low. CAD and the MXN were hammered and the Canadian trade gap widened. However, Crude bounced off the 200-DMA, while tropical storm Nate turns towards the Gulf of Mexico's oil region. Gold continued its slide to 1266 fresh lows within the bearish channel. 

Key events ahead in Asia

No events, but the US session will hold the following, as noted by analysts at Westpac:

"NZ: complete election results, including special votes, should be announced on Saturday.

"US: Sep non-farm payrolls are expected to increase by 80k (Westpac +100k) while unemployment holds 4.4%. The consensus is below average due to likely effects from the hurricanes but note that the forecast range is wider than usual and weather-affected prints can be subject to material revisions. Fedspeak includes Dudley speaking on the policy outlook and higher education, George, Bostic and Kaplan at a workforce conference, Rosengren at the Atlanta Economic Conference, and Bullard talks about the standard of living across different US regions. On Saturday, Moody’s is scheduled to review the US sovereign debt rating."

Key notes from US sesison:

• BoE’s McCafferty: No need for QE reversal until bank rate has been increased "several times"
• Fed's George: Further gradual rate hikes will be needed
• Wall Street rallies to record highs as data points to strengthening US economy
• USD/MXN: Mexican peso tumbles to the lowest since June
• Gold tumbles below $1270 as US stocks surge to record highs
• Catalan leaders are divided over their next step - Bloomberg