Fitch Downgrades US – Markets on Back Foot
Asian markets are set to open in the red after rating agency Fitch downgraded the US from AAA to AA+ after the New York market closed today. The reaction has been relatively muted so far with stock futures dropping, yields falling and some haven flows across currencies but traders are expecting more downside as the Asian market kicks in. US indices had experienced a bit of a breather on the first trading day of the month ahead of the key jobs data later in the week, the Dow finished up 0.2%, the S&P down 0.27% and the Nasdaq down 0.43%. Notable moves in the FX market included yen and CHF buying on the back of the Fitch news and Aussie sunk against the greenback and crosses after the RBA held rates earlier in the day. Gold has jumped in early APAC trading with more haven trading up 0.6% from yesterday’s low.
Kiwi Dollar in Focus After Employment Data
The Kiwi dollar is trading near key support levels after some mixed employment data this morning. The quarterly employment change was expected to come in with an increase of 0.6%, however, it beat expectations with a 1% jump, however, the headline unemployment rate jumped 0.2% to 3.6% higher than the expected 3.5%. The Kiwi has since dropped against the greenback and on most crosses, notably against its cross Tasman cousin the Aussie. The Kiwi is now sitting just above key hourly trendline support at 0.6110 and a break here could open the way for a challenge of the June low just below the 60-cent level.
Markets to Remain Volatile Ahead of Jobs Numbers
Market volatility has already picked up on the Asian open today after the Fitch US downgrade and a data surprise out of New Zealand. The macroeconomic calendar is relatively quiet for the rest of the Asian day and into the European session but things could get more interesting once the US session picks up in earnest later in the day. Not only will we see Wall Street’s reaction to the Fitch update but we have the ADP non-Farm Employment data, a traditional front runner to Friday’s non-Farms data but we also have the latest US Crude Oil Inventory numbers which have been playing on the Oil price recently.
