Rates as of 0500 GMT

Market Recap

The purchasing managers indices PMIs are in the above table, but its easier to see what happened with this table. The key point the composite PMIs fell below the 50 line for Germany and the Eurozone as a whole as well as for the US. Furthermore Japan is almost there, too. The global deceleration is proceeding faster than people had imagined. The UK though is an exception; although both manufacturing and services declined, they declined less than expected.

Against the background of weakening economic growth, bond yields declined across the globe. Even in Japan, where theyre already lower than anywhere else.

Inflation expectations also unwound further in many countries. Longterm inflation expectations are now back to about where they were before Russia invaded Ukraine.

With global growth slowing, the old monetary policy convergence theme came back into play, except this time it was concern that monetary policy would converge to the Bank of Japans stance, not the Feds.

but it seemed more like CAD was just following risk sentiment.

as did AUD, but just not as much.

In the US, fed funds rate expectations came down sharply, explaining the weakness in USD. The key to the dollars course is whether Wednesdays meeting of the ratesetting Federal Open Market Committee will change this outlook. I assume Fed Chair Powell will repeat his usual mantra that the Fed will do whatever it takes, or words to that effect, to get inflation…