Forexlive Americas FX news wrap: US dollar falls after strong two-year Treasury auction

• US 2-year note auction results 3.874% vs 3.880% WI
• US August consumer confidence 103.3 vs. 100.7 expected
• Dallas Fed services sector outlook index -7.7 vs -0.1 prior
• Richmond Fed August manufacturing index -19 versus -14 expected
• US June Case-Shiller home price index +0.4% m/m vs +0.3% expected
• Fed discount rate minutes: Chicago and New York directors favored cuts
• White House: Iran is ‘postured and poised’ to launch an attack on Israel
• ECB’s Knot: Comfortable with gradual easing

Markets:

• US 10-year yields up 1.9 bps to 3.83%
• WTI crude oil down $1.69 to $75.73
• Gold up $8 to $2524
• S&P 500 up 0.2% to 5226
• NZD leads, USD lags

Early angst in European fixed income markets spread to the US, leading to some risk aversion and a firming US dollar. One catalyst for the selling in Europe was a comment from Kier Starmer that there will be pain in the budget. Others pointed to month end but whatever the cause, it added to worries ahead of a two-year sale.

With yields substantially below last month, there were fears of a tail in the $69 billion auction. That didn’t come to pass as it was bid just before the deadline and then again after a 0.6 bps stop through. That result validated the lower range in yields and idea that the Fed will be aggressive.

In turn, dollar sellers returned with a decent amount of vigour, leading to 15-25 pip moves lower in the dollar and a rebound in gold to positive territory.

Prior to that, economic data wasn’t a big factor. Eyes were on the consumer confidence report and the rest of the slate but there were no big surprises.

This article was written by Adam Button at www.forexlive.com.