Market wrap: risk sentiment improved - Westpac

Analysts at Westpac offered a market wrap for the US session that saw a resurgence in the greenback.

Key Quotes:

"Global market sentiment: Risk sentiment improved, and US economic data was strong, helping boost the USD and equities.

Interest rates: US 10yr treasury yields ranged sideways between 2.13% and 2.15%, while 2yr yields nudged a little higher from 1.32% to 1.34%. Fed fund futures yields continued to price the chance of a December rate hike at around 37%.

Currencies: The US dollar index is up 0.7% on the day, having risen even before the strong ADP and GDP data. EUR fell from 1.1985 to 1.1883. USD/JPY extended gains from 109.65 to 110.44. AUD fell from 0.7996 to 0.7890. NZD fell from 0.7278 to 0.7189 – a two-month low. AUD/NZD consolidated after the strong construction data response, between 1.0960 and 1.1017 (a five-month high).

Economic Wrap

US GDP rose 3.0% annualised in Q2 (vs 2.7% expected, and 2.6% previous) in its second estimate.

Revisions to GDP contributions were healthy: personal spending added 2.3ppts to growth, up from an advance estimate of +1.9ppts; and business investment was revised up to show a slightly firmer 0.85ppt contribution (up from 0.64ppts). Otherwise housing investment, net exports and inventories werfe mostly unchanged.  On the negative side, government was revised down to -0.1ppt (s the advance read at +0.1ppt). Overall, the report indicates stronger momentum to the private sector economy. ADP private sector employment rose 237k in August (vs 185k expected), posing upside risks to tomorrow’s broader non-farm payrolls report.

German CPI rose 1.8% yoy in August (as expected, but above 1.7% in July). Eurozone CPI data tomorrow may well surprise higher."