marctomarket.com / by Marc Chandler / October 13, 2016
The US dollar is firm, and the euro has slipped below $1.10 for the first time since late-July. Although the dollar’s gains against nearly all the major and emerging market currencies are being attributed to the FOMC minutes, which underscored ideas that another hike was drawing near, US interest rates are a lower today. Both the two and 10-year yields yesterday rose to their highest levels in four months (87 bp and 1.80% respectively). Both are now 2-3 bp lower.
The FOMC minutes suggested that understandings of the labor market were a critical issue that divided members. Yesterday’s JOLTS data in this context was not particularly helpful, though it is reported with an additional month lag behind the non-farm payrolls. The August JOLTS report showed the biggest drop in job openings year. The takeaway was healthy but slower. The decision to include a risk assessment for the first time since January in the FOMC statement coupled with the minutes underline that debate at the Fed is over the timing of the move, not direction.
Meanwhile, the main news today has been China’s trade balance. The $42 bln surplus was much smaller than the market had expected. The median forecast from the Bloomberg survey was $53 bln, which would have been a small increase from August’s $52 bln surplus. It is the smallest surplus since the Lunar New Year distortions that saw the trade surplus fall to $32.5 bln and $29.6 bln in February and March.