Market yet to react to approaching Fed asset run-off - AmpGFX

According to Greg Gibbs, Director at Amplifying Global FX Capital, it is surprising to see US yields fall and the bond curve at its flattest point since December after the FOMC minutes where the Fed firmed up expectations it would begin its asset run-off later this year, after one or two more rate hikes.

Key Quotes

“The fall in equities in recent weeks and lower bond yields may reflect the Trump administration’s setbacks and falling confidence that it can deliver tax reform. Additionally, there may be some worries over geopolitical risks as gas attacks in Syria and ballistic missile tests in North Korea add pressure on the Trump administration. As yet there is also no smoking gun on inflation in the USA and some mixed economic reports recently.”

“Lower equities and yields continue to support JPY and gold.  However, the Trump/Xi meeting has the potential to deliver soothing rhetoric for the equity market, and the ADP employment report was again much stronger than expected, raising the odds of a strong payrolls report.  This may lift US yields, and support the USD/JPY from the low end of its current range.  Much may depend on the wages data and indicators of tightness in labor market.”