US Markets Quiet After Downgrade – Dow up 0.3%
US markets experienced a relatively calm trading day yesterday as investors continued to digest Friday’s sovereign downgrade from Moody’s. The major indices all closed near flat, with the Dow up 0.32%, while the S&P and Nasdaq edged just 0.09% and 0.02% higher, respectively. The dollar and Treasury yields lost ground on the day, with the DXY down 0.54% to 100.36, while the 2-year fell 2.3 basis points to 3.977% and the 10-year lost 3 basis points to 4.447%. Oil prices eased higher, with Brent up 0.18% to $65.52, and WTI adding 0.37% to move up to $62.72 a barrel. Gold prices caught a bit of a bid as haven flows pushed back in on the back of the Moody’s news, rising 0.52% to $3,229.73 an ounce.
Dollar Back Under Pressure After Downgrade
The US dollar came under pressure in trading yesterday as the FX market evaluated the latest knock to the US economy after Moody’s downgraded the US government’s credit rating late in the day on Friday. Adding to pressure on the greenback, trade tensions are starting to ratchet up again, with US Treasury Secretary Scott Bessent advising that ‘Liberation Day’ tariffs will be implemented on countries that do not negotiate in “good faith.” Safe haven currencies—the yen and Swiss franc—gained well on the day after gapping on the Monday open, and now traders will be awaiting further updates as we progress through the week. Anticipate more dollar weakness, especially against haven products, if trade talk continues to move south, with strong recovery rallies if more deals look on the cards. But again, it looks like volatility for the markets in the days ahead while uncertainty continues to reign.
Commodity Countries in Focus for Markets Today
The macroeconomic calendar picks up significantly today with some key updates due out of commodity countries Australia and Canada. The Asian session could be a busy one today, with the initial focus on China as they announce Loan Prime Rate updates, with both the 1-year and the 5-year expected to have a 0.1% cut. Later in the session, the focus will move south for the Reserve Bank of Australia’s latest rate call, where the market is expecting another 25-basis-point cut from 4.10% to 3.85%. There is little on the schedule in the European session today; however, the focus will be north of the border soon after the New York open, when key Canadian inflation numbers are released. Traders are expecting the CPI m/m number to show a 0.1% decrease, while the y/y Median stays at 2.9% and the Trimmed y/y remains at 2.8%. We are also set to hear from Fed members Barkin and Bostic later in the session.
