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Comments from the FBI deputy director:

• Motive still not clear
• Trump agreed to participate in an interview
• No evidence of co-conspirators
• Suspect’s search history showed power plants, mass shooting events, bombs and attempted assassination of Slovakian PM
• Shooter made more than 25 different firearms-related purchases online using an alias
• Was identified as a suspicious person and police took a photo around 5 pm on the day of the shooting
• Confirms Trump was struck by a bullet but unclear if it was whole or fragmented

It’s a bizarre situation but thankfully there are no state actors associated with the shooter.

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

There are rumours of a capital gains tax.

• Disaster of Truss’ mini-budget shows what happens if you don’t take action
• We will cut spending projects worth £8 billion next year
• We will be taking immediate action
• If left unaddressed, this would result in a 25% increase in the budget deficit this year

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

The euro is floundering near the lowest since July 8 as the US dollar broadly strengthens.

It’s tough to say what’s driving the moves at the moment but Thursday’s stronger US GDP numbers and Friday’s hotter PCE inflation are tailwinds for the dollar. That said, Fed pricing hasn’t moved much and Treasury yields are lower today (though off the lows).

It’s month-end so that’s certainly a consideration and the Nasdaq has found a nice bid today in a tumultuous market.

The ECB highlighted data dependence and that will leave it vulnerable to data this week.

Technically, there will be bids at 1.0800 but the bulls might flee if that cracks, particularly given the broadening USD strength today. Datawise, the only notable release today is the Dallas Fed and that’s rarely a market mover. I will note that McDonald’s today warned about a broadening consumer weakness that they expect to last for a few quarters.

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

Synopsis:

Goldman Sachs analyzes the recent sharp decline in USD/JPY and outlines a cautious approach to reengaging in long positions, anticipating potential stabilization around the 150 level.

Key Points:

1. Recent USD/JPY Movement:

   • Decline: USD/JPY has dropped nearly 10 big figures from its early July peak of almost 162.
   • Factors: A combination of JPY-positive factors has driven this significant move.

2. Current Outlook:

   • Avoiding Longs for Now: Despite the recent sharp decline, Goldman Sachs advises against taking long positions immediately.
   • Support Level: The firm expects USD/JPY to continue moving back to the 150 level.

3. Factors Limiting JPY Appreciation:

   • US Recession Risk: Sustained JPY appreciation seems limited without an increased risk of a US recession.
   • Fed Response: A Fed willing to implement additional rate cuts would be necessary to support further JPY strength.

4. BoJ Policy Expectations:

   • Potential BoJ Actions: Goldman Sachs economists expect the BoJ to hike rates and reduce JGB purchases, which could add further downward pressure on USD/JPY.
   • Impact Assessment: Any impact from BoJ actions is likely to be short-lived unless the Fed unexpectedly cuts rates soon after, which is deemed unlikely.

5. Strategic Positioning:

   • Long-Term View: Goldman Sachs maintains a 3-month forecast of 155 for USD/JPY, reflecting expectations of still-decent US growth and supported risk sentiment.
   • Reengagement Timing: The firm is looking for opportunities to reengage in USD/JPY longs but prefers to wait for a more favorable entry point.

Conclusion:

Goldman Sachs remains cautious about reengaging in USD/JPY longs immediately, given the recent sharp decline and potential for further downward movement to the 150 level. However, they see limited scope for sustained JPY appreciation without increased US recession risk and further Fed cuts. The firm maintains a 3-month forecast of 155 for USD/JPY and will look for better opportunities to reengage in long positions.

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

McDonald’s is out with a warning on the health of consumers, and not just the physical health.

The fast food sector is first to feel the pinch when money is tight and that’s what is happening now, according to an exec on today’s post-earnings call. An exec said that the quick-serve sector ‘meaningfully’ slowed in a majority of the markets that it serves, including the US, Australia, Canada and Germany.

They also said the weakness in the low-end consumer has “deepend and broadened” and that sales fell globally for the first time in more than three years. Global comp sales were down 1% in Q2 compared to +0.5% expected by analysts. US sales fell 0.7% in Q2.

They company said they expect consumers will continue to feel the pinch of the economy for ‘at least the next several quarters’ and noted that the landscape was ‘very competitive’.

McDonald’s rolled out $5 meals recently as it tries to fight back on the perception that its food is too expensive and the company said the meals sold above expectations.

Shares of the company are up 1% pre-market but are down 16% since January. I take this is a strong signal about a slowing economy.

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

It’s good to be back after a week away. The economic calendar and earnings calendar is very busy this week and it looks like the hurricane season will pick up as well.

An area of disturbed weather over the central tropical Atlantic Ocean is expected to interact with an approaching tropical wave during the next couple of days, according to the NHC. They say that environmental conditions are conducive for some development later this week while the system is in the vicinity of the Greater Antilles or the Bahamas.

It looks to be tracking North of oil infrastructure but the cone is wide and it will have human impacts if it forms.

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

Headlines:

• Dollar on steadier footing to kick start what will be a big week for markets
• Japanese yen stays in the spotlight with the BOJ coming up later this week
• USD/JPY Technical Analysis – The pair bounced on the key 152.00 support
• UK June mortgage approvals 59.98k vs 60.40k expected
• UK July CBI retailing reported sales -43 vs -24 prior
• Japan top council urges government, BOJ to be mindful of weak yen when guiding policy

Markets:

• USD leads, GBP and NZD lag on the day
• European equities mostly higher; S&P 500 futures up 0.4%
• US 10-year yields down 4 bps to 4.158%
• Gold up 0.1% to $2,388.23
• WTI crude down 0.6% to $75.52
• Bitcoin up 3.2% to $69,629

It was mostly a quiet session as markets are gearing up for a big week ahead.

The dollar is keeping on steadier footing, seen slightly higher across the board. USD/JPY was swingy in Asia but steadied mostly in European morning trade, hugging around 153.70-90 levels.

Besides that, the greenback posted a slight advance with GBP/USD falling to 1.2805 before keeping around 1.2820-30 levels now – down 0.4% on the day. EUR/USD is also softer, down 0.3% to 1.0820 while commodity currencies are marginally lower as equities are in a better mood today.

US futures are up but it’s early in the week to say anything about it, that especially with big earnings reports coming up. Four of the Magnificent Seven will be reporting and that will be one to watch for broader market sentiment, alongside the BOJ, Fed, and BOE meetings.

Elsewhere, Treasury yields are down on the day and that’s making for a bit of a mixed start to the new week with gold just marginally higher while oil is down despite Middle East tensions.

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

The decision is likely to be a finely balanced one though, with expectations of the bank rate vote being 6-3 or 5-4 in favour of a rate cut. But what are traders pricing in for the decision currently? The OIS market shows that there is a ~61% probability priced in, with roughly 55 bps of rate cuts for the year.

After the August decision, the BOE still has three meetings left for the remainder of 2024. That being in September, November, and December. So, there is still time to fit in the supposed two rate cuts priced in by traders at the moment.

Taking that into consideration, it might not matter too much if the BOE cuts this week or in September. That especially if they do send a more dovish signal at the meeting on Thursday. And even more so if the votes look to be close and the language is leaning towards moving to a rate cut at the next meeting.

Of course, the kneejerk reaction is to see the pound jump if the decision is to keep the bank rate on hold this week. But there is a strong likelihood to see that reaction quickly faded as well, unless the BOE sends a message that they are still very much uncomfortable with price pressures at present.

Just take note that the previous decision in June saw the central bank comment that the decision was already “finely balanced”, even if it was a 7-2 vote in favour of keeping the bank rate unchanged. Besides that, there was no easing language put in as the statement consisted of:

• Need to be sure inflation will stay low before cutting rates
• Monetary policy will need to remain restrictive for sufficiently long to return inflation to target
• BOE remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably
• Will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole

So, any changes to that will help to rebuff the two rate cuts priced in for the months ahead even if there is no rate cut in August. In other words, the details is the thing to look out for with the decision this week.

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

UK retailers look to have endured another rough month as the retail sales balance slumps further in July. The headline reading is the weakest since April, with CBI noting that poor weather and softer demand conditions weighing on the retail sales. The outlook index for August is seen at -32, which is a mild improvement but still the weakest reading since February. Pain.

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

The main events for the week ahead are as follows:

On Tuesday, Switzerland will release the KOF economic barometer, and the U.S. will publish the CB consumer confidence and JOLTS job openings data.

Wednesday will bring inflation data for Australia and the Bank of Japan’s monetary policy announcement. Additionally, the eurozone will release its inflation data. In the U.S., we will see the ADP non-farm employment change, the employment cost index q/q, pending home sales m/m, and the FOMC monetary policy announcement.

On Thursday, the Bank of England will make its monetary policy announcement for the U.K., while in the U.S., the unemployment claims, ISM manufacturing PMI and ISM manufacturing prices will be reported.

Finally, on Friday, Switzerland will release its inflation data, and the U.S. will report average hourly earnings m/m, non-farm employment change and the unemployment rate.

The consensus for Australian CPI data is 3.8% y/y, which, although still elevated, is expected to be lower than the 4.0% rate in May. Expectations for trimmed mean CPI q/q and CPI q/q are also expected to rise.

Inflation data in Australia remains high, and RBA Governor Michelle Bullock has emphasized that domestic demand is too strong for inflation to return to the desired target. She hinted at a potential rate hike, which is likely if inflation prints above expectations. Although there are some signs of the economy slowing, along with the labor market, the RBA remains primarily focused on fighting inflation.

All eyes are on this week’s BoJ meeting as the market waits to see whether the Bank will hike interest rates. Recent economic data in Japan has been mixed. Q1 GDP growth was revised downward, showing a bigger decline than expected, while core inflation registered a 2.6% y/y increase. However, a positive sign was the Q2 Tankan survey, which reflected some better GDP growth potential.

Analysts believe that at this week’s meeting the BoJ will keep rates unchanged at 0% to 0.1%. There might be a change in the pace of its bond purchases over time, with a 1 trillion yen reduction per quarter, and the Bank is also anticipated to revise their projections for inflation and economic growth. If inflation continues to surprise on the upside, the BoJ is likely to start hiking rates, with a first possible hike of 15 bps at the October meeting, according to Wells Fargo.

In the eurozone, the consensus for the headline CPI y/y is a slight decline to 2.4% and core inflation is expected to slow to 2.8% with services inflation dropping more. However, this moderation alone might not give the ECB enough confidence to go ahead with a September rate cut unless it’s supported by other data such as a slowdown in Q2 wage growth and another favorable CPI reading in August.

At this week’s meeting, the Fed is expected to keep its monetary policy unchanged and potentially signal that rate cuts are likely. The market currently expects the first rate cut to occur at the September meeting. The Fed will also probably reiterate that there has been progress regarding inflation in the past months and that there’s a risk of deterioration in the labor market.

Analysts believe that the latest Q1 bounce in consumer inflation is likely just noise. The PCE deflator has finally reached a 2.7% annualized rate, along with inflation decline showing signs of consistent progress, especially in core inflation, which is at its lowest since 2021. This does not mean that the fight is over, but it does indicate that the Fed is very close to achieving its 2.0% target.

The economy continues to add a considerable number of jobs, but other labor market indicators are down. There are concerns as the unemployment rate is rising and businesses continue to lay off workers, indicating potential issues in the labor market.

The consensus is that the BoE will announce a first rate cut of 25bps at this week’s meeting, but there are some analysts who think the Bank might wait until September. The economic data is still not where the Bank would like it to be, especially with services inflation which held at a high 5.7% y/y in June. However, an increasing number of policymakers have taken a dovish stance recently increasing the likelihood of a 25bps cut now.

In the U.S., the consensus for the ISM manufacturing PMI is a rise from 48.5 to 49.0. ISM manufacturing prices are also expected to increase from 52.1 to 52.5. The ISM manufacturing index has been improving in recent months but remains in contractionary territory. While a slight improvement is likely in this week’s data as well, further progress is uncertain.

The consensus for the average hourly earnings month-over-month is +0.3%, the same as the prior month. The non-farm employment change is expected to be 177K compared to the previous 206K, and the unemployment rate is expected to remain unchanged at 4.1%. The unemployment rate development puts it very close to meeting the Sahm Rule threshold which predicts the onset of recession, but the rule might not apply in this case because of the unique nature of the post pandemic economy. Even though the economy continues to add jobs at a robust pace, there are concerns regarding the labor market, particularly from the rising unemployment rate and downward revisions.

Wish you a profitable trading week.

This article was written by Gina Constantin at www.forexlive.com.

Amid all the focus on the Fed, let’s also not forget that it is NFP week in markets. Not only that, the BOJ and BOE are also on the agenda in adding to Australia and Eurozone CPI data. And to top all of that off, there is also plenty of major earnings releases on the calendar; not least with four of the Magnificent Seven reporting.

The dollar is keeping steadier so far today, with slight gains seen across the board. USD/JPY is also now flat at 153.75 while GBP/USD is the laggard, down 0.5% on the day to 1.2810 currently:

For cable, the downside pressure extends past the 50.0 Fib retracement level of the swing higher this month. And that continues the rejection of the 1.3000 mark as well. The 61.8 Fib retracement level at 1.2777 will be the next support region to watch as we look towards the bigger events this week.

Besides that, EUR/USD is down 0.2% to 1.0835 and AUD/USD down 0.1% to 0.6540 on the day currently.

It comes amid a more mixed mood in markets though. S&P 500 futures have trimmed gains to around 0.2% but 10-year Treasury yields are down nearly 3 bps to 4.166%, inching towards the lows for the month.

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