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Bank of China have announced a 10bps-20bps cut in time deposit rates.

Cuts begin today.

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About that awkward headline. No doubt someone will confuse this for a PBOC rate cut. It is not. The PBOC did cut rates, and dropped in other easing measures, on Monday:

• ForexLive Asia-Pacific FX news wrap: A series of easings from the People’s Bank of China

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

US President Biden speaking from the Oval Office in his stepping aside from the election.

Its as expected:

• “I have decided the best way forward is to pass the torch to a new generation”
• “that is the best way to unite our nation”

He’s right but he is still a politician, and all this is a side-eye at the other guy. It’s the game, isn’t it?

Biden will continue as President for his term.

Once again endorses Harris.

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There are no market implications of all this.

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Wishing him well in retirement, and plenty of ice cream!

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

Corporate Service Price Index (CSPI) is Japan’s Services PPI.

From the BOJ report:

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

The contraction for South Korea’s economy
in the second quarter was unexpected:

Advance Q2 GDP -0.2% q/q, the sharpest contraction in six quarters

• expected +0.1%, prior +1.3% (this 1.3% growth in Q1 was the fastest since Q4 2021)
• strong exports
• consumer spending fell

For the y/y, came in at +2.3%

• expected +2.5%, prior +3.3%

Attention now turns to the Bank of Korea meeting on August 22. Market expectations have been for a cut in Q4.

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

Earlier:

• Japan finance minister Suzuki spoke from Brazil – didn’t comment on FX levels

This now from Kanda on China. He didn’t mention FX either:

• Won’t comment on current situation in FX

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Japan’s Finance Ministry’s Vice Finance Minister for International Affairs Kanda. He is the official who will instruct the BOJ to intervene, when he judges it necessary. Often referred to as Japan’s ‘top currency diplomat’.

Atsushi Mimura takes over from Kanda on July 31, following the meeting of the Group of 20 finance ministers and central bank governors in Rio de Janeiro from July 25.

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

Suzuki says he is monitoring political developments in the US.

He didn’t comment on FX.

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USD/JPY is moving the way Japanese authorities desire, so they may as well avoid comments that might be read the wrong way. IMHO anyway.

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

• VIX has closed at its highest since April 19
• Big Wins and Misses: IBM and Chipotle Beat Expectations, Ford Falls Short
• NASDAQ index has its worst trading day since November 2, 2022
• Crude oil settles at $77.59
• Bitcoin consolidating between 100 and 200 hour moving averages
• U.S. Treasury auctions off $70 billion of the 5-year note at a high yield of 4.121%
• European major indices close lower
• Atlanta Fed GDPNow growth estimate for 2Q comes in at 2.6% vs 2.7% previously
• Bank of Canada’s Macklem. We need to be more symmetric in our policy
• EIA weekly crude oil inventories drawdown of -3.741M vs drawdown of -1.583M estimate
• Fed’s Dudley: It may be too late to fend off a recession
• BOCs Macklem’s press conference opening statement
• What changed in the BOC rate statement from June to July? A lot
• US new home sales for June 0.617M vs 0.640M estimate
• The Bank of Canada cuts rates by 25 basis points to 4.50% from 4.75%
• US July flash services PMI 56.0 vs 55.0 expected
• Don’t expect geopolitics to get any better
• US preliminary wholesale inventories for June +0.2% versus 0.5% estimate
• US goods trade balance for June -$96.8 billion versus $-98.8 billion estimate
• The JPY is the strongest and the NZD is the weakest as the NA session begins
• ForexLive European FX news wrap: Yen gains continue, equities in retreat mode
• US MBA mortgage applications w.e. 19 July -2.2% vs +3.9% prior

The US stock trading got off to a weak start. Shares of 2 of the Magnificent 7 – Alphabet and Tesla – announced earnings after the close yesterday and the markets did not like them (even though Alphabet beat on the top and bottom lines).

Moreover, markets were a little spooked by comments made by former Fed Governor Dudley (the Fed is in the quiet period ahead of their interest rate decision) who said that the unemployment negative cycle was kicking in and the Fed should not dawdle with regard to cutting rates. He added that It might already be too late to slow unemployment from moving higher. Tomorrow’s initial jobless claims should be interesting after last week’s 342K jump. Continuing claims were also elevated last week

With earnings season just getting going, visions of “slower growth ahead” danced in traders heads and they took stocks lower.

After the lower opening, the best the Nasdaq could do today was -250 points on the day. The S&P’s best was -47.71 points. Ouch. The broader S&P and Nasdaq indices each had their worst trading days since December 2022 and November 2022 respectively. Ouch.

At the bell, the S&P fell -2.32% while the NASDAQ index tumbled -3.64%. The Dow Industrial Average average fell -1.25% and the Russell 2000 fell -2.13%.

In the Forex market, the JPY and the CHF were the flight to safety beneficiaries. They are the strongest of the major currencies. The AUD and the NZD were once again the weakest of the majors as concerns about China and potentially US, is traditionally not a good combination for those countries. I think it is the third day in a row that those currencies are the weakest (might be 4 days).

In Canada, the Bank of Canada cut rates for the second consecutive meeting by 25 basis points to 4.5% from 4.75%. The USDCAD moved above the high of the trading range since April at 1.38038. Can the price keep the momentum in the new day and push toward the high for the year at 1.38448?.

For the USDJPY, it tumbled below its 100-day moving average at 155.419 and also worked its way below the 38.2% retracement of the trend move up from the December 2023 low. That level came in at 153.654. However, late-day buying did push the price back above that 38.2% retracement. Upside resistance in the new date will be at the swing area between 154.52 and 154.87.

In the US debt market, the yield curve steepened with the 2-year down -1.2 basis points and the 30 year up 7.2 basis points:

• 2-year yield 4.432%, -1.2 basis points
• 5-year yield 4.175%, +2.5 based point
• 10-year yield 4.285%, +4.7 basis point
• 30-year yield 4.541%, +7.2 basis points

The 2-10 year spread is moved closer to parity at -14.7 basis points (its highest level since October 2023). The 2-30 year spread move to +10.9 basis points. That is it’s steepest since July 2022.Tomorrow, the first cut for Q2 growth will be released with the economists looking for 2.0%. The Atlanta Fed GDPNow closed it’s book on its model with a higher value of 2.6%.

Perhaps of greater interest will be the weekly claims data. Last week, the initial claims rose to 243K. It is expected to dip to 237K tomorrow. If it surprises to the upside once again, the Dudley fears may make for another troublesome day as bad news continues to be bad news. However, it may also mean the Fed will be ready a little earlier for a cut in July vs September. US core PCE will be released on Friday (Fed’s favorite inflation measure).

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

UBS are projecting a recovery for commodity prices, including oil, gold and more.

In a note analysts say that concerns over sluggish Chinese demand have weighed on commodity prices in recent weeks. But prices will recover due to “solid demand and limited supply”.

• lower crude exports could help tighten the oil market
• copper prices have held up
• gold has more room to rally

On gold, UBS cite:

• drivers for the rally remain in place, including strong central bank buying, ongoing geopolitical uncertainty, and the likely Federal Reserve move to cut interest rates in the coming months

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

Equities had another down session.

S&P 500 fell more than 2%. It had its longest run since the GFC in 2007 without a loss that large, 356 days I think was the count. NASDAQ fell hard too:

• NASDAQ index has its worst trading day since November 2, 2022

The CBOE volatility index, VIX, closed at 18.04. Its highest since April 19.

FWIW a plunge like this for stocks is a tightening in financial conditions, like a rate hike but not quite. The Federal Open Market Committee (FOMC) are meeting on July 31. I don’t think this changes the ‘no cut’ outlook, but if there is much more of the same sort of falls that view will change.

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All the dudes that have been calling a top for the past two years are breaking out the high fives today.

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

Key earnings after the close

IBM: shares are up 1.83% in after-hours trading

• Revenues 15.77 billion versus 15.62 billion estimat – BEAT
• EPS $2.43 versus $2.20 expected- BEAT

Chipotle: Shares are up 8.155% in after-hours trading

• Revenues $2.97 billion versus $2.94 billion expected: BEAT
• EPS $0.34 versus $0.32 expected: BEAT

ServiceNow: Shares are up 6.15% in after-hours trading

• Revenues $2.63 billion versus $2.61 billion BEAT
• EPS $3.13 versus $2.84 estimate BEAT

Ford: Shares are down -12.22% in after-hours trading

• Revenues $47.8 billion versus $44.02 billion estimate BEAT
• EPS $0.47 versus $0.68 estimate MISS

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

Lower-tier data due from Japan. The Corporate Service Price Index is Japan’s Services PPI.

• This snapshot from the ForexLive economic data calendar, access it here.
• The times in the left-most column are GMT.
• The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

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

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

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