• A more cautious mood after Fitch cuts US credit rating
• USD/JPY pushed lower amid safety flows for now
• What is priced in ahead of the BOE policy decision tomorrow?
• BOJ’s Uchida says may step in before 10-year yields hit 1%, depending on speed of the move
• BOJ’s Uchida: Decision to make YCC flexible not a move towards ending ultra loose policy
• Switzerland July manufacturing PMI 38.5 vs 44.0 expected
• Switzerland Q3 consumer confidence -27.1 vs -29.7 prior
• US MBA mortgage applications w.e. 28 July -3.0% vs -1.8% prior

Markets:

• JPY leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.5%
• US 10-year yields down 3 bps to 4.017%
• Gold up 0.3% to $1,950.98
• WTI crude up 0.7% to $81.96
• Bitcoin up 1.1% to $29,550

The big news on the day is Fitch downgrading the US‘ credit rating from AAA to AA+ here.

That is leading to risk aversion in markets as equities are lower and bonds are more bid. As European traders entered, the risk-off wave intensified but has abated somewhat now in the last few hours. S&P 500 futures were down around 0.5% early on before deepening losses to 1.1% but are now back down by 0.5% on the day.

European indices observed a poor open but have also trimmed declines, though are still down by around 0.7% to 0.9% roughly at the moment.

In FX, it was the Japanese yen that found a bid on the session with USD/JPY from 142.90 to a low of 142.25 before reversing that to 142.80-90 levels again now – still down 0.3% on the day.

The dollar was steadier throughout, keeping little changed against the European currencies while the aussie and kiwi bore the brunt of the selling today.

AUD/USD is marked lower to its lowest in two months – down to 0.6575 at the moment – amid the more cautious risk mood and break below 0.6600 in Asia trading.

All eyes are now on US traders to see how they take to the key news but I reckon it won’t be long till markets turn their attention to the US jobs report on Friday. In that lieu, we do have ADP employment data later to provide a bit of a teaser – even if it has not been an accurate indicator of what to expect from the non-farm payrolls.

This article was written by Justin Low at www.forexlive.com.