The US bond market was in focus again this week. The beat in the US ISM data midweek kept the pressure on US bonds and sent US 10-year yields moving back to 4.35%, USDJPY higher, and gold lower. The Reserve Bank of Australia and the Bank of Canada both held rates steady, but inflation pressures are not allowing either central bank to signal ‘job done’ just yet. The US Inflation print next week will be crucial in deciding the path of rates for the Fed when it meets on September 20, so it is still too early this week to call for a tide change in central bank policy.

Other key events from the past week

  • AUD: RBA holds, Sep 5: The RBA held on rates for the third month in a row. Going forward it will be very focused on upcoming inflation data and labour data. Watch those data points for potentially sharp moves in the AUD.
  • USD: Hot PMI Prints, See 6: The headline for ISM US PMIs came in very hot at 54.5 versus the 50.5 expected this week. This allowed US yields to move higher and the USDJPY too, increasing the risks of BoJ intervention.
  • CAD: Hawkish Hold, Sep 6: The BoC held rates this week at 5%, but stressed that persistent inflation pressures remain a concern. Some saw this as a ‘hawkish hold’ on rates by the Bank of Canada as last week’s GDP miss did not result in the BoC signaling the end of its rate hiking cycle.

Key events for the coming week

  • USD: US Inflation focus, Sep 13: There is no need for a reminder that US inflation data is key for the path of US monetary policy. Watch out for a big miss in Wednesday’s inflation data to potentially lift gold higher & send USDJPY lower.
  • Seasonal Insights: Where now for the AUDNZD?
  • EUR: ECB Interest Rate Decision, Sep 14: Short-term interest rate markets are currently pricing in a 66% chance of the ECB staying on hold with rates next week. However, could a surprise hike sharply lift the EURGBP?

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