Daily Commentary BY THE CURVE TEAM –

Euphoria Fades As FOMC Debate Continues

9th of January, 2018

The euphoric start to the year we saw in a number of markets last week eased overnight. The data flow continued to pick up while the debate amongst the Fed members continues to be aired publicly.

Last week’s surge in equity markets petered out overnight with most major bourses finishing near flat to down. The USD also found a little bit of support, which knocked the AUD from its recent highs. Interestingly bond markets continued to drift lower as the grind for higher yields continues.

Yields were higher despite dovish comments from the Atlanta Fed president Raphael Bostic who said he wants to see inflation higher in order to justify the Fed’s current projections for 3 to 4 hikes in 2018. He is worried about consumer inflation expectations, saying “this possibility is one factor that might argue for being somewhat more patient in raising rates.”

On the data and it has been a mixed start for the week domestically. Yesterday’s AiGroup construction performance index slipped back from a solid 57.5 in November to 52.8, suggesting a sharp slowing in the pace of growth in activity. A fall below 50 indicates a contraction in activity.

On the upside consumer confidence surged in the first week of January. The ANZ-Roy Morgan weekly consumer sentiment index jumped sharply for the week ending January 7 to its highest level since November 2013. Lets hope it continues.

Today the local data continues with building approvals and jobs ads later this morning.


David Flanagan

Director - Interest Rate Markets