Forex: Dollar Turns to Fed-speak for Direction After Jobs Data Delay

Talking Points

Aussie Dollar Tracks Bond Yields Higher as Policy Outlook Firms
Yen Rallies as BOJ Keeps Policy Mix Unchanged, Nikkei 225 Falls
US Dollar to Decline if “Fed-Speak” Points to Delay in QE Cutback

The Australian Dollar outperformed in overnight trade, rising as much as 0.5% percent on average against its leading counterparts. The move tracked a rally in Australia’s benchmark 10-year bond yield, hinting the currency found support in an improving rates outlook. Indeed, investors are pricing no further RBA interest rate cuts over the coming 12 months, according to data compiled by Credit Suisse. The Japanese Yen likewise advanced as the Nikkei 225 index declined, driving demand for the regional safe-haven currency. The currency received an additional boost after the Bank of Japan opted not to introduce additional stimulus measures at its monthly policy meeting.

Looking ahead, the delay in the release of September’s US Employment figures due to the lingering government shutdown has stripped the economic calendar of the most significant bit of scheduled event risk left through the week-end. That shifts the spotlight to the “Fed-speak” docket. The presidents of the Dallas, New York, Richmond and Minneapolis Fed branches (Fisher, Dudley, Lacker and Kocherlakota, respectively) as well as Governor Stein are all scheduled to cross the wires. The timing of a forthcoming move to “taper” QE asset purchases – particularly against a backdrop of fiscal retrenchment – remains in focus. Rhetoric supporting the suspicion that the current stalemate in Washington DC may delay policy normalization stands to weigh on the US Dollar while boosting risky assets, and vice versa.

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