Dovish Repricing Hits Markets as Yields Fall
US Treasury yields are decreasing, which is having a positive impact on markets. The 2-year yield has dropped by 0.9%, or 4 basis points, while the 10-year and 30-year yields have fallen by 0.6% and 0.5%, respectively.
Federal Reserve FOMC member Christopher Waller's speech was seen as dovish, with him outlining specific factors he will consider when making the September interest rate decision. He stated that core inflation looks better than main indicators suggest and that if the upcoming CPI inflation reading does not show a negative surprise, he will likely support keeping rates unchanged.
Waller's comments led to a decline in market-implied probability of a rate hike in September, which is now near 50% compared to over 60% yesterday. The weak ADP data also contributed to the dovish repricing.
The dollar is weakening against all other G10 currencies, while the yen is gaining due to hawkish rhetoric from BoJ policymakers. The Nasdaq and gold are benefiting from lower bond yields, with tech stocks such as Tesla, Meta, Microsoft, and Nvidia performing well.