Articles

• High-yield
• WI level at the time of the auction 4.166%
• Bid the cover 2.64X vs six-month average of 2.54X.
• Tail -0.4 basis points vs six-month average of 0.0 basis points
• Dealers 8.87% vs six-month average of 14.2%
• Directs (domestic buyers) 16.76% vs six-month average of 17.5%
• Indirects (international buyers) 74.38% vs six-month average of 68.3%

AUCTION GRADE: A

Strong demand by international buyers at 74.38%. That left the dealers with a small 8.87% of the balance. Domestic buyers were a little lesson average but not by much. The cover was higher than the average, and the tail was negative vs the WI level at the time of the auction.

Quite a strong auction as international investors seem to want to get involved in US debt ahead of potential rate cuts through year end.

This article was written by Greg Michalowski at www.forexlive.com.

The GDP data in the Q1 came in at 1.4%. Today we learned the advanced GDP for Q2 came in at 2.8%.

If you looked at the component contributors or subtractions from the total GDP number:

For Q1:

• Consumption +0.92%.
• Investment, +0.77%
• Government, +0.31%
• Net imports/exports -0.65%

The sum comes to the GDP of 1.4%

For Q2:

• Consumption, +1.57%.
• Investment, +1.40%.
• Government, +0.53%.
• Net imports/exports, -0.72%

The sum of those components comes to GDP of 2.8%

Now, within the investment component is inventory. Inventories can fluctuate up and down and indeed they did swing from a negative contributor in Q1 (-0.42%) to a positive contributor (+0.82%) in Q2.

What if the GDP numbers for each was adjusted for the inventory swings?

Inventories in the Q1 subtracted -0.42% from the GDP. If that is added back, the growth ex inventories comes at around 1.8% in Q1.

For Q2, if you were to subtract the inventory gain of 0.82% from the total 2.8% gain, the GDP would be just below 2.00%

So combining the two quarters GDP ex the inventory, the growth comes in around 1.9% which is about the trend growth.

Soft landing?

The Fed may look at it that way.

This article was written by Greg Michalowski at www.forexlive.com.

The major European indices are closing mixed thanks to the UK FTSE 100 which rose by 0.40%. The majority of the indices, however, did close lower.

A snapshot of the closing levels shows:

• German DAX, -0.48%
• France CAC -1.15%
• UK FTSE 100 +0.40%
• Spain’s Ibex -0.56%
• Italy’s FTSE MIB -2.03%

As London/European traders exit, the major US indices have also rebounded and trade higher on the day in volatile price action:

• Dow Industrial Average average is up 373 points or 0.94% at 40,232 (back above 40,000)
• S&P index is up 28 points or 0.52% at 5455.41. It index was down -36.17 at the session lows.
• NASDAQ index is up 30.56 points or 0.18% at 17374. At session lows, the index was down -308.45 points

the small-cap Russell 2000 is trading at 42.85 points or 1.95% at 2238.30.

US yields are lower with the yield curve tilting more to the downside:

• 2-year yield 4.416%, unchanged.
• 5-year yield 4.125%, -2.6 basis points
• 10 year yield 4.242%, -4.3 basis points
• 30-year yield 4.490%, -5.8 basis points

in commodities:

• crude oil is trading higher by $0.45 at $78.07
• Gold prices are getting hit by $-38 or -1.62% at 2358.38
• Silver is down $-1.07 or -3.72% at $27.82
• Bitcoin is trading at $64,700 after trading at a session lows $63,424.

Copper which traded to a low of 4.036 its lowest level since April 1 and down -22.37% from its May 20 high, is trading up at 4.139 up 0.73%.

Today, the US GDP came in higher than expectations at 2.8% versus 2.0% expected. Consumer spending which accounts for two thirds of GDP was a contributor. Inventories also added 0.8% to the overall number.

This article was written by Greg Michalowski at www.forexlive.com.

The WSJ Timiraos in his X tweets, speculates that the core PCE data from the GDP which came in higher at 2.9% vs 2.7% expected, does not imply the core PCE for June to be released on Friday will be different than the 0.18% gains expected.

However, to square to the higher 2.9% data from the GDP, it implies revisions higher in the April and May (which came in at 0.26% and 0.08% respectively).

At the end of the day, it was higher than what the math was expecting.

This article was written by Greg Michalowski at www.forexlive.com.

As the North American session trading gets underway, the major indices are mixed. Expect volatile trading as the market digests the next moves after the largest declines since the end of 2022 for the broader S&P and NASDAQ indices yesterday. Japan’s Nikkei index also fell the most since 2021. So markets are unsettled:

A snapshot of the market 11 minutes into the open is showing:

• Dow Industrial Average +87.85 points or 0.23% at 39936.68
• S&P index up 4.43 points or 0.09% at 5431.44
• NASDAQ index down -6.58 points or -0.03% at 17334

The small-cap Russell 2000 is up 9.59 points or 0.44% at 2204.17

US yields are lower with a more negative yield curve:

• 2 year yield 4.408%, -0.8 basis points
• 5-year yield 4.123%, -2.6 basis points
• 10 year yield 4.246%, -3.9 basis points
• 30-year yield 4.500%, -4.9 basis points

In other markets:

• crude oil is trading down $0.92 or -1.2% at $76.68, but off it’s low at $76.04
• Gold is trading down $-28.95 or -1.2% at $2368.40
• silver is down $-1.22 or -4.23% at $27.67.
• Bitcoin is trading at $64,058 after falling to a low of $63,806.

This article was written by Greg Michalowski at www.forexlive.com.

The futures are applying modest changes in the major indices I have the open, but I get a feeling that it will be a volatile day once again. Yesterday bought the NASDAQ and S&P fell by the most since the end of 2022. Ouch.

Futures are currently implying

• S&P index +1.5 points
• Dow Industrial Average with -21 points
• NASDAQ index +25 points

yields are lower, but off their lowest levels (and trading near highs) after the better-than-expected GDP data:

• two year yield 4.424%, +0.6 basis points
• 5-year yield 4.141%, -0.9 basis points
• 10 year yield 4.260%, -2.4 basis points
• 30-year yield 4.515% -3.3 basis points

The U.S. Treasury will complete their coupon auctions for the week with the sale of 7 year note at 1 PM ET.

This article was written by Greg Michalowski at www.forexlive.com.

• Prior quarter 1.6%
• GDP Q2 2.8 % vs 2.0% estimate. The Atlanta Fed GDP now estimate was at 2.6%
• GDP sales 2.0% versus 1.9% estimate. Prior 2.0%
• GDP consumer spending 2.3% vs 2.5% prior
• GDP deflator 2.3% versus 2.6% estimate. Prior 3.1%
• GDP core PCE prices 2.9% versus 2.7% estimate. Prior 3.7%
• PCE prices advanced 2.6% vs 3.4% prior
• PCE ex food and energy and housing 2.5% vs 3.3% prior
• PCE services ex Energy and housing 3.3% vs 5.1% prior

Primarily consumer spending from increases in services and goods.Also inventory increased this month (last quarter the inventories subtracted from GDP) The end of year Fed projections shows -69 basis points versus 72 basis points prior to the releases of GDP and durable goods

This article was written by Greg Michalowski at www.forexlive.com.

• Prior 0.1%
• Durable goods -6.6% versus +0.3% expected. Worst since April 2020
• Durable goods ex transport +0.5% versus +0.2% estimate. Prior 0.1%
• Durable goods ex Defense -7.0% versus unchanged last month (revised from -0.2%)
• Nondefense capital goods ex air +1.0% versus +0.2% expected. Prior month -0.9% versus -0.6% previously reported

The end of year Fed projections shows -69 basis points versus 72 basis points prior to the releases of GDP and durable goods

This article was written by Greg Michalowski at www.forexlive.com.

• Initial jobless claims 235K vs. 238K expected and 243K prior.
• Continuing Claims 1851K vs. 1860K expected and 1867K prior.

This shows that the labour market is still doing good.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Headlines:

• USD/JPY fall draws in the next key support level
• USD/JPY Technical Analysis – 152.00 is the mother of all levels
• Backs against the wall for stocks in July trading
• Germany July Ifo business climate index 87.0 vs 88.9 expected
• Eurozone June M3 money supply 2.2% vs. 1.8% y/y expected
• France July business confidence 94 vs 99 prior
• UK July CBI trends total orders -32 vs -18 prior
• Japan government maintains economic assessment for the month of July
• Chinese yuan strengthens sharply as Beijing pushes back for now

Markets:

• JPY leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.2%
• US 10-year yields down 6.1 bps to 4.225%
• Gold down 1.1% to $2,370.38
• WTI crude down 1.5% to $75.45
• Bitcoin down 2.9% to $64,104

The risk retreat continues and the main beneficiaries continue to be the Japanese yen and Swiss franc this week. The dollar while falling against the two, remains mostly steadier across the board elsewhere.

USD/JPY was seen around 152.90 in the handover from Asia to Europe but then quickly fell to a low of 151.93 to start the session. The pair is still down 0.9% at around 152.50 currently, eyeing the next key support level from the 200-day moving average at 151.56 next.

USD/CHF also steadily moved lower in a push from 0.8830 to 0.8780 currently. Elsewhere, GBP/USD is down 0.3% to 1.2870 levels while commodity currencies stay pressured amid the more defensive risk sentiment. AUD/USD is down 0.9% to 0.6520 while NZD/USD is down 0.5% to test the 0.5900 mark.

In other markets, equities continue to come under pressure with European indices sinking across the board. The CAC 40 index is down 2% in a fall to its lowest since January while the DAX is also marked down by 1.2% on the day.

Meanwhile, US futures are also struggling after having held steadier in the earlier stages today. S&P 500 futures are down 0.2% with tech shares starting to lag once more ahead of the Wall Street open.

Bonds were more bid though as yields fell, marking a more defensive risk setup in general. 10-year yields in the US are down 6 bps to 4.225% currently.

And in the commodities space, the correction in metals is continuing with silver down nearly 5% to $27.58. The precious metal has now fallen back below its 100-day moving average for the first time since March, dropping to its lowest levels since early May. Besides that, gold is also down over 1% to a two-week low, cracking back below $2,400.

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

The firm argues that the dollar rally during the period of 2021 to 2022 means that there is still scope for a deeper correction to the downside momentum in the greenback moving forward. They don’t expect the dollar to retest the lows seen towards the end of 2020 but says that the currency should move lower as we look towards next year.

They anticipate USD/JPY as being the biggest loser after having been one of the biggest movers amid rising US yields in the last few years.

Societe Generale sees the pair falling back to 140.00 in early 2025. Besides that, they are of the view that EUR/USD could retest its 2022 highs in a push to 1.1400 by Q2 2025.

A word of warning is that one should always take these forecasts with a pinch of salt. They tend to be revised a lot based on more recent market developments. For example, Societe Generale made a forecast back in January here that USD/JPY would fall back under 140.00 in Q2 this year and were targeting the 135.00 mark by year-end. Look at how things turned out instead.

And looking at how things have played out in the last two years, a key lesson is that one should never underestimate the dollar. Sure, it isn’t posting gains in a swashbuckling mood. But when you consider that many in the market were calling for its demise in 2023 and also in 2024, the dollar’s resilience has been rather commendable.

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

• Prior -18

The manufacturing order book balance worsened again in July but the good news at least is that the expectations balance increased from 13 in June to 25 this month. The latter is the highest reading since March 2022. However, quarterly business optimism declined to -9 from +9 in April, marking the softest such reading since October last year.

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