Market wrap: dollar losing ground - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: The US dollar and US interest rates slipped overnight, boosting the AUD and NZD.

Interest rates: US 10yr treasury yields fell from 2.43% to 2.37%, while. 2yr yields fell from 1.23% to 1.19%. Fed funds futures continued to price in a 100% chance of a hike by June and another by November (previously December).

Currencies:  The US dollar index is 0.,2% lower. EUR rose from 1.0511 to 1.0583. GBP underperformed, falling to 1.2125 – a two-month low – as the weekend’s comments from PM May who seemed willing to sacrifice EU market access continued to reverberate. USD/JPY fell from 117.50 to 116.00. AUD rose from 0.7302 to 0.7374 – a one-month high. Outperformer NZD rose from 0.6950 to 0.7033. AUD/NZD slipped from 1.0520 to 1.0475.

Economic Wrap

The Fed’s composite Labour Market Conditions Index slipped 0.3 points on December – the first fall since May – with the rise in the unemployment rate in the official data the main cause.

FOMC member Lockhart was less hawkish than some of his FOMC colleagues, expecting only 2% GDP growth for the next few years, and not yet ready to estimate fiscal policy effects. Rosengren was more hawkish, with three rate hjikes in 2017 considered reasonable, although he too said fiscal policy is difficult to predict.

Economic Event Risks Today

Australian retail sales have seen a notable improvement through the 3 months to October. The pace of growth should slow to a moderate 0.3% in Nov.

China CPI & PPI: Commodity prices have seen PPI rally strongly. CPI, however, is still subdued."