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 market has rallied and high beta plays are aligned positively, benefitting from the renewed enthusiasm.
The Nasdaq Composite jumped 0.9% to 15,486.29 intraday, with S&P 500 up 0.8% and the Dow Jones Industrial Average 0.4% higher. All sectors were in the green, with consumer discretionary and technology leading the charge.
UD/USD is firm, 0.9% higher around the highs of the day near 0.7217 at the time of writing. 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 2% target, then that implies a negative real policy rate at the end of a Fed tightening cycle, with the economy near full employment.,'' the analysts added, ''Sure, there are downside risks from more variants but the rates market seems to be pricing in perfection from the 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.''
Meanwhile, the consumer confidence index rose to 115.8 in December from November's upwardly revised 111.9 level, the Conference Board reported Wednesday. The consensus among analysts on Econoday indicated a 110.7 print. The survey's cutoff was Dec. 16. The US Gross Domestic Product was also revised higher in the third estimate for the third quarter, Q3, to 2.3% from 2.1% in the second estimate, versus expectations for no revisions.
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