ForexLive Asia-Pacific FX news wrap: Fitch Ratings downgrades the US to AA+ from AAA

<p>DOWNGRADE:</p><ul><li><a href="https://www.forexlive.com/news/fitch-downgrades-usa-long-term-credit-rating-to-aa-from-aaa-20230801/">Fitch downgrades USA long-term credit rating to AA+ from AAA</a></li><li><a href="https://www.forexlive.com/news/here-is-what-happened-in-markets-the-last-time-the-us-was-downgraded-stocks-fx-and-gold-20230801/">Here is what happened in markets the last time the US was downgraded: Stocks, FX and gold</a></li><li><a href="https://www.forexlive.com/news/fitch-placed-usa-on-negative-watch-back-in-may-now-has-cut-the-us-rating-from-triple-a-20230801/">Fitch placed USA on negative watch back in May, now has cut the US rating from triple A</a></li><li><a href="https://www.forexlive.com/news/eurusd-spiking-higher-usdjpy-lower-after-us-rating-downgrade-20230801/">EUR/USD spiking higher, USD/JPY lower after US rating downgrade</a></li><li><a href="https://www.forexlive.com/news/us-equity-futures-have-dropped-hard-upon-reopening-after-the-downgrade-20230801/">US equity futures have dropped, hard, upon reopening after the downgrade</a></li><li><a href="https://www.forexlive.com/news/senior-biden-admin-official-says-fitch-downgrade-of-the-usa-is-baseless-and-bizarre-20230801/">Senior Biden admin official says Fitch downgrade of the USA is baseless and bizarre</a></li><li><a href="https://www.forexlive.com/news/mohamed-el-erian-says-fitch-downgrade-of-the-us-is-a-strange-move-likely-to-be-dismissed-20230801/">Mohamed El Erian says Fitch downgrade of the US is a strange move, likely to be dismissed</a></li></ul><p>Other:</p><ul><li><a href="https://www.forexlive.com/centralbank/deutsche-bank-expect-25bps-rate-hike-from-the-bank-of-england-this-week-close-call-20230802/">Deutsche Bank expect +25bps rate hike from the Bank of England this week – 'close call'</a></li><li><a href="https://www.forexlive.com/news/td-are-expecting-the-us-nonfarm-payroll-headline-at-260k-well-above-consensus-20230802/">TD are expecting the US nonfarm payroll headline at +260K, well above consensus</a></li><li><a href="https://www.forexlive.com/news/goldman-sachs-says-fitch-us-downgrade-unlikely-to-force-major-selling-of-us-treasuries-20230802/">Goldman Sachs says Fitch US downgrade unlikely to force major selling of US Treasuries</a></li><li><a href="https://www.forexlive.com/centralbank/national-australia-bank-expect-one-more-reserve-bank-of-australia-rate-hike-20230802/">National Australia Bank expect one more Reserve Bank of Australia rate hike</a></li><li><a href="https://www.forexlive.com/centralbank/boj-deputy-governor-uchida-japan-needs-to-maintain-easy-policy-20230802/">BOJ Deputy Governor Uchida: Japan needs to maintain easy policy</a></li><li><a href="https://www.forexlive.com/centralbank/pboc-sets-usd-cny-mid-point-today-at-71368-vs-estimate-at-61664-20230802/">PBOC sets USD/ CNY mid-point today at 7.1368 (vs. estimate at 7.1664)</a></li><li><a href="https://www.forexlive.com/Cryptocurrency/icymi-binance-japan-launches-crypto-services-with-with-34-tokensvirtual-currencies-20230802/">ICYMI – Binance Japan launches crypto services with with 34 tokens/virtual currencies</a></li><li><a href="https://www.forexlive.com/news/icymi-opecs-crude-production-fell-by-the-most-in-three-years-via-a-bloomberg-survey-20230802/">ICYMI – OPEC’s crude production fell by the most in three years (via a Bloomberg survey)</a></li><li><a href="https://www.forexlive.com/centralbank/boj-june-meeting-minutes-members-agreed-must-maintain-current-easy-monetary-policy-20230801/">BOJ June meeting minutes – members agreed must maintain current easy monetary policy</a></li><li><a href="https://www.forexlive.com/news/australian-industry-index-manufacturing-pmi-construction-pmi-all-into-deep-contraction-20230801/">Australian Industry index, manufacturing PMI, construction PMI – all into deep contraction</a></li><li><a href="https://www.forexlive.com/news/new-zealand-unemployment-rate-36-vs-expected-35-20230801/">New Zealand unemployment rate 3.6% (vs. expected 3.5%)</a></li><li><a href="https://www.forexlive.com/news/former-us-president-trump-has-been-charged-with-multiple-election-related-crimes-20230801/">Former US President Trump has been charged with multiple election-related crimes</a></li><li><a href="https://www.forexlive.com/news/forexlive-americas-fx-news-wrap-1-augthe-usd-moves-higher-30-yr-yield-highest-since-nov-20230801/">Forexlive Americas FX news wrap 1 Aug:The USD moves higher. 30 yr yield highest since Nov.</a></li><li><a href="https://www.forexlive.com/news/private-oil-survey-data-shows-huge-headline-crude-draw-much-larger-than-expected-20230801/">Private oil survey data shows huge headline crude draw, MUCH larger than expected</a></li><li><a href="https://www.forexlive.com/news/trade-ideas-thread-wednesday-2-august-2023-20230801/">Trade ideas thread – Wednesday, 2 August 2023</a></li></ul><p>
The
big news of the session hit just after 5pm New York time, Fitch (the
rating agency) downgraded US long-term debt (i.e. US government,
sovereign, bonds) to AA+ from AAA. As an aside, Fitch warned on this
back in May, citing the debt ceiling debacle and US governance
difficulties.</p><p>The
market response was slow. US equity index futures were down a touch
on
the news before
they closed. Upon reopening they gapped lower, but not by a huge
margin (pun intended). As I update ES and
NQ futures, while off their lows of the Globex session so far, have not filled in
the gap. FX markets were, of course, trading, but only New Zealand
and Australia were active, Australia only just. It was too early for
Tokyo (it
was before 7am),
Singapore and Hong Kong (before
6am)
FX markets,
and thus the lowest liquidity time of the 24-hour forex cycle. The
USD strengthened. EUR/USD traded to circa 1.1020, USD/JPY dropped
briefly to around 142.75. Both have since fully retraced.
</p><p>The
New Zealand dollar has been an under-performer. The NZ Q2 employment
report showed unemployment coming in higher than in Q1 and above the
consensus expected.
</p><p>In
central bank news we had the Bank of Japan June meeting minutes. And
also a speech from Deputy Governor Uchida in which he went to great
lengths to explain last week’s move on YCC was aimed at making the
Bank’s YCC more flexible and at maintaining easy policy, not
something with an eye on exit from easy policy.</p><p>In
oil news the privately surveyed inventory report said the latest
weekly headline draw was in excess of 15mn barrels, well ahead of the
circa 1.4mn draw that was the consensus expected. The weekly draw was
the largest for this survey for at least 4 decades. We await
confirmation from the official survey from the US Energy Information
Administration (EIA) due Wednesday morning US time.
</p><p>Asian
equity markets:</p><ul><li><p>
Japan’s
Nikkei 225 -1.8%</p></li><li><p>
China’s
Shanghai Composite -0.8%</p></li><li><p>
Hong
Kong’s Hang Seng -2%</p></li><li><p>
South
Korea’s KOSPI -1.4%</p></li><li><p>
Australia’s
S&amp;P/ASX 200 -1%</p></li></ul><p align="left">
(This
chart is from our charting app, which is free and <a href="https://www.forexlive.com/LiveCharts">can
be found at this link</a>)</p>

This article was written by Eamonn Sheridan at www.forexlive.com.