USD: G10 FX mixed post-Fed as markets eye RBNZ, BoJ risks – Scotiabank

The US Dollar (USD) is mixed and G10 currencies are showing some divergence in the aftermath of Wednesday’s FOMC, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD mixed with divergence driven by individual

"New Zealand Dollar (NZD) is a notable underperformer on the back of a weaker than expected Q2 GDP print, down 1.0% against the USD as markets price in a greater risk of a 50bpt cut at the next RBNZ meeting in early October. JPY is also soft and trading back to flat on the week ahead of Friday’s BoJ, where markets are expecting a hawkish hold that will pave the way for a hike in either October or November. Sanae Takaichi has officially entered the LDP leadership race, and concerns about her pro-fiscal/ monetary stimulus views are likely weighing on the yen as we head into Thursday’s NA session. The CAD, AUD, and CHF are trading close to flat vs. the USD, and market participants are clearly showing little concern about the weaker than expected Australian jobs release earlier today (-5.4K on headline, vs. 21K exp.)."

"Switzerland’s SNB will be making its rate decision next Thursday, and markets are expecting no change—the SNB is currently at the zero lower bound with a policy rate of 0% — given concerns about public reactions to a too-rapid descent into negative rates. Meanwhile, GBP, EUR, NOK and SEK are all outperforming the G10, along with MXN. The BoE held rates unchanged at 4.00%, as expected, and the Norges Bank delivered an as-expected 25bpt cut to 4.00%. The broader market’s tone is constructive, with renewed gains in equity futures as they push to fresh record highs while US yield trade with renewed softness following Wednesday’s Fed-driven turbulence."

"Markets are still pricing about 50bpts of easing for the rest of this year—specifically 22bpts for the October Fed meeting and a cumulative 45bpts by December. In commodities, oil prices are quietly consolidating their recent gains, while copper appears to be attempting some stabilization following its latest pullback. Gold is flat following Wednesday’s textbook bearish outside reversal. For Thursday’s NA session we look to the release of US weekly claims data and the Philly Fed at 8:30am ET. The US will also release its leading index at 10am ET and the monthly TIC flows figures at 4pm ET. There are no scheduled Fed speakers for Thursday, but the calendar will resume with the SF Fed’s Daly set to speak on Friday."