- As the dollar slides in a risk-on atmosphere, AUD/USD is in positive territory.
- US stocks rose as US data lifted spirits for the holidays.
AUD is the strongest currency on the day in a risk-on environment with US Consumer Confidence coming in higher than forecasted for December as third-quarter economic growth was revised higher. The US stock markets have rallied and high beta play are benefitting from renewed enthusiasm.
The Nasdaq Composite rose 0.9% to 15,486.29 in the intraday. S&P 500 was up 0.8%, and the Dow Jones Industrial Average was 0.4% higher. All sectors were in green, with technology and consumer discretionary leading the charge.
The AUD/USD exchange rate is firm at 0.9% above the highs of the day close to 0.7217 at the time. The 10-year US Treasury yield is down 0.34% points to 1.46% and the US dollar, as measured by the DXY is down 0.39% sliding from 96.602 to a low of 96.036. US rates are starting to normalize. However, analysts at Brown Brothers Harriman explained that the ”market tightening expectations for the Fed still have room to adjust; 2-year yield differentials are moving back in the dollar’s favour.”
“If inflation returns to the target of 2%, then that would indicate a negative real rate at the conclusion of a Fed tightening period the analysts said. “Sure, there are downside risk from more variants, but the rates market seems be pricing in perfection from Fed. We continue to believe that markets are underestimating the Fed’s propensity to tighten, and this should lead to a further rise in US short-term rates in 2022.”
The Conference Board reported Wednesday that the consumer confidence index rose to 111.9 in December, a rise of 115.8 from November’s revised 111.9. Econoday analysts agreed that there would be a 110.7 print. December 16 was the cutoff for the survey. The third estimate for the US Gross Domestic Product for the third quarter, Q3, was revised higher to 2.3% from 2.1% in its second estimate. This is in contrast to expectations of no revisions.