The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0251 GMT - Markets risk overinterpreting the tone of Federal Reserve Chairman Kevin Warsh's press conference after its meeting, says BlackRock Investment Institute's Jean Boivin in a note. The Fed helped reestablish the new chairman's credibility with its decision to hike rates, Boivin says. He notes the emphasis on the strength of the U.S. economy was a notable feature of the post-decision press conference, which markets interpreted as hawkish. The head of the BlackRock Investment Institute notes--against the backdrop of stronger economic growth--the rate hike may not be bad news for risk assets. "We think it is important to distinguish the need to safeguard the Fed's credibility from the start of a sustained hiking cycle," says Boivin. (megan.cheah@wsj.com)
0234 GMT - Finding a pulse in Australia's property market is difficult at the moment, but it is there. The housing auction clearance rate gradually improved last week, rising to 52.6% from 49.3% the week prior, says property research group Cotality. It was the strongest result in 19 weeks. The improvement also came despite a higher volume of auctions with 1,585 auctions held across the combined capital cities, up from 1,431 the week prior. House prices are weakening as interest rates increase, with the downward momentum expected to continue in the coming months. (james.glynn@wsj.com; X @JamesGlynnWSJ)
0233 GMT - The main motivation behind the Fed's decision to hike rates this time was credibility, given bond market pricing and recent developments in oil markets, says Christian Scherrmann, DWS Chief U.S. Economist. If U.S. inflation doesn't cool down in coming quarters, one or two rate hikes by the Fed may not suffice. One or two rate hikes will also likely not solve problems caused by external shocks, such as rising oil prices and renewed uncertainty from tariffs, Scherrmann says in a note. Nevertheless, there are good reasons to believe that inflation will trend lower and that tightening to the point where domestic demand slows will be unnecessary, Scherrmann adds. (monica.gupta@wsj.com)
0216 GMT - If the Federal Reserve raises interest rates as markets project--more than three hikes by the middle of next year--rate differentials between the U.S. and Japan will narrow little under the current policy path priced in for the Bank of Japan, says Mitsubishi UFJ Morgan Stanley Securities strategist Keisuke Tsuruta. The wide rate gap has been a major driver of the yen's weakness. Investors are likely to stay sensitive to the possibility of faster BOJ tightening, given that some board members have pointed to global monetary shifts when considering Japan's own policy, he says. The yield on 10-year Japanese government bonds was last down 0.5 bp at 2.990%. (megumi.fujikawa@wsj.com)
0148 GMT - Fixed mortgage interest rates in Australia are rising ahead of the central bank's policy meeting at the end of the month. Markets expect the Reserve Bank of Australia to raise the official cash rate by 25 basis points. The likely hike comes as house prices are in a sharp retreat. After weeks of inactivity, fixed rates have now started to move, and they're on the way up, not down, Canstar says. NAB and ANZ on Thursday raised their fixed rates by up to 20 basis points. This takes the number of lenders hiking fixed rates in the month of September to nine. (james.glynn@wsj.com; X @JamesGlynnWSJ)
0137 GMT - If the Bank of Japan raises its policy rate Friday as widely expected and signals a hawkish stance on further monetary tightening, it could trigger a sharp appreciation in the yen over Japan's upcoming long weekend, says Daiwa Securities analyst Eiji Kinouchi. The setup risks mirroring the posthike market turmoil of summer 2024, when a BOJ rate increase, alongside speculation over the Fed's policy path, prompted a surge in the yen and a steep selloff in Tokyo equities, he says. Central bank officials have been more cautious in their market communications since that episode. Japanese financial markets will be closed for national holidays from Monday through Wednesday. (megumi.fujikawa@wsj.com)
0129 GMT - The Reserve Bank of New Zealand was non-committal at its September policy meeting about when the next interest rate hike might come but was clearly leaning toward a pause at the next meeting in October, says Matthew Galt, an economist at ANZ. Global developments since then have been suggesting it would be prudent to hike sooner rather than later, and the resilience shown in 2Q GDP data adds further pressure in that direction, he adds. ANZ continues to expect a 25-basis-point hike by the RBNZ in October. (james.glynn@wsj.com; @JamesGlynnWSJ)
0122 GMT - The Fed's rate rise will likely add to pressure on the Reserve Bank of Australia to raise interest rates again, says David Bassanese, chief economist at betashares. Bassanese now expects the RBA to raise rates at its policy meeting later this month, with a 50% chance of a follow up rate rise in November. Global inflation pressures, resulting from both the Iran war and AI boom, along with domestic pressures suggests the RBA can't afford to wait until November before raising rates again, he adds. Further rate rises will add to the downward pressure on house prices, he says. (james.glynn@wsj.com; @JamesGlynnWSJ)
0121 GMT - With the Federal Reserve signaling another rate hike this year via its dot plot, the Bank of Japan is likely under even stronger pressure to deliver a rate hike on Friday and provide hawkish guidance on further action, says Daiwa Securities analyst Eiji Kinouchi. However, concerns are growing over whether the Japanese economy can withstand more monetary tightening, he says. "Capital expenditure is already contracting year over year, and historical trends show that the yen typically shifts stronger as the economy enters a recessionary phase," he adds. While a stronger yen eases inflation, it could cool economic growth, primarily by weighing on exporters' profits. The dollar is last trading at 156.12 yen. (megumi.fujikawa@wsj.com)
0113 GMT - The Fed hiking is positive for the dollar, but there may not be enough central bank policy divergence out there to move its value much higher, says Juan Perez at Monex USA. Other official decisionmakers are going to be acting in tandem with the Fed, he says, convinced that inflationary pressures are inescapable and necessitate higher rates, especially given the effects of the Middle East war on energy. While Fed Chair Warsh seems more inclined to "laissez-faire" approaches, he still has domestic opposition in the form of Treasury intervention to provide liquidity for bond markets, as well as a determination to intervene in FX, particularly to aid the yen, Perez reckons. The dollar is flat at 156.19 yen. (fabiana.negrinochoa@wsj.com)
0058 GMT - U.S. interest rates are likely to remain elevated going into 2027, says J.P. Morgan Asset Management's Tai Hui in a note. While forecasts from Federal Open Market Committee members didn't change much at the Federal Reserve's September meeting, the updated median projection implies one more increase by the year-end, says the strategist. The Fed remaining hawkish going into 2027 could prompt investors to reassess asset valuations, particularly those of relatively expensive technology stocks that could be sensitive to interest-rate movements, he says. A catalyst to extend the equity bull market therefore looks unlikely in the foreseeable future, he says. Still, the possibility of the U.S. policy rate returning to above 5.0% remains limited, he adds. (megan.cheah@wsj.com)
0056 GMT - Bitcoin edges higher in the morning Asia session as markets digest an expected rate hike by the Fed. Bitcoin has remained relatively resilient, says Cooper Duschang at Talos, holding broadly around pre-announcement levels. Exchange flows suggest that rather than a uniform risk-off response, investors seem to be actively repositioning as they parse the Fed's messaging, the analyst says. Around 2,170 BTC moved onto exchanges following the rate increase, followed shortly afterward by a sizeable withdrawal of about 1,260 BTC, he notes. The question now is whether Bitcoin's resilience and spot demand will hold as attention shifts to the prospects for further tightening. Bitcoin is up 0.3% at $76,374, according to LSEG data.
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