Articles

• Prior month was 0.6%
• Wholesale inventories advanced for June 0.2% versus 0.5% estimate.
• Retail inventories ex auto 0.2% versus revised -0.1% last month (from 0.0%)

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

• Prior month $-98.4 billion revised to $-99.37 billion
• Trade deficit for June $-96.8 billion versus expectations of $-98.8 billion

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

Headlines:

• USD/JPY drops below 155.00 mark for the first time in seven weeks
• USD/JPY Technical Analysis – The sellers remain in control
• Eurozone July flash services PMI 51.9 vs 53.0 expected
• France July flash services PMI 50.7 vs 49.8 expected
• Germany July flash services PMI 52.0 vs. 53.1 expected
• Germany August GfK consumer sentiment -18.4 vs -21.0 expected
• UK July flash services PMI 52.4 vs 52.5 expected
• BOJ rate hike next week reportedly to be a “close call”
• Germany reportedly to hold general elections on 28 September next year

Markets:

• JPY leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.7%
• US 10-year yields down 0.6 bps to 4.233%
• Gold up 0.3% to $2,417.21
• WTI crude up 1.1% to $76.81
• Bitcoin up 0.9% to $66,414

The Japanese yen continues its good form on the week, as USD/JPY tumbles below the 155.00 mark for the first time in seven weeks. The pair fell to a low of 154.40 in the handover from Asia to Europe, before recovering back to 154.90 during the session. But as we look to US trading now, the pair is down at the lows for the day around 154.10 currently.

That comes despite the dollar largely keeping steadier against the rest of the major currencies bloc.

The other lead gainer today is the Swiss franc, benefiting from a more defensive risk sentiment in markets as well as more sluggish euro area PMI data. USD/CHF was hanging around 0.8910 to start the session before falling to around 0.8860 currently.

Besides that, the dollar is largely steadier with EUR/USD down 0.1% to 1.0845 and GBP/USD flat at 1.2910 on the day.

The antipodeans continue to stay as laggards with AUD/USD down 0.2% to 0.6600 and NZD/USD down 0.3% to 0.5935. That said, both are off their respective lows from earlier in the day.

In the equities space, the selloff in stocks is intensifying ahead of the Wall Street open. European indices are weighed down with French stocks lagging again. Meanwhile, US futures are dragged down after underwhelming earnings from Tesla and Alphabet to some degree. S&P 500 futures are down 0.7% with Nasdaq futures down 1.1% currently.

Coming up later, the Bank of Canada will be announcing their latest policy decision. So, that will be one to watch for the loonie. As for broader markets, the US PMI data for July will be in focus.

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

The newswire says that the date had been decided by the German cabinet. It has to be held at the latest by 26 October 2025 and no earlier than 31 August 2025. So, this is right smack in the middle of the expected period in autumn.

This will be the elections for the federal parliament, with 630 seats up for grabs in the Bundestag (as of now). For some context, the last election in 2021 resulted in a “traffic light” coalition taking charge between the SPD, FDP, and Greens. That broke the previous “grand coalition” between the SPD and CDU/CSU.

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

• Prior +3.9%
• Market index 209.3 vs 214.1 prior
• Purchase index 134.8 vs 140.4 prior
• Refinance index 614.9 vs 613.0 prior
• 30-year mortgage rate 6.82% vs 6.87% prior

Mortgage applications fell back in the past week with a drop in purchases activity offsetting a marginal increase in refinancing activity. Overall, it still points to a more subdued sentiment in the US housing market.

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

Canadian dollar traders are preparing for a busy final session to the trading day today as the Bank of Canada is due to release its latest rate call with the market fully expecting to see a second consecutive 25 basis point cut from the central bank. Data has been pulling back hard in Canada and last week’s CPI number probably locked in today’s rate cut as it came in nicely below expectations on both the month-on-month and year-on-year print. Retail Sales numbers on Friday confirmed the slowing economy with the Core number coming it at -1.3% against an expect 0.5% decrease.

The Cad has depreciated hard against the greenback over the last couple of weeks with the dollar gaining around 1.3% against its northern neighbour and it is now sitting near significant resistance levels on both the Hourly and Daily charts which should provide good trading opportunities on the announcement, statement, and subsequent press conference. Resistance is now sitting just under 1.3820 with further resistance at the yearly high just 25 pips higher.  Support comes in initially around 1.3700, however unless there is a much more hawkish than expected turn from the bank then expect the current trend to provide good buying opportunities on any dip.

Resistance 2 : 1.3846 – 2024 High

Resistance 1 : 1.3817 – Long-term Trendline Resistance

Support 1 : 1.3698 – 200-Day Moving Average

Support 2 : 1.3615 – Long-term Trendline Support

The post Trade the Cad on the Bank of Canada Rate Decision first appeared on IC Markets | Official Blog.

But alas, the ECB has to keep their focus on inflation pressures first and foremost. If growth expectations were the main argument, there would be a strong reason to push with a rate cut in September after the PMI data earlier. Instead, the situation now presents a bit of a headache for the central bank.

The economy is starting to slow down again after a resilient showing in Q1, followed by marginal growth in Q2. However, there hasn’t been too much progress on the inflation front over the last two to three months especially.

The disinflation process remains relatively gradual at best and one might even argue that it is stalling somewhat as of late.

Even from the PMI data today, HCOB noted that:

“Prices data did not provide hope for relief. Input prices in the services sector increased at a faster rate and selling prices rose at a similar pace to the previous survey period. To make things worse, input prices in manufacturing, which fell for more than a year between March 2023 and May 2024, have now increased for two months straight. Output prices fell only fractionally, which may make it more difficult for overall inflation to make the necessary progress towards the 2% target. Our conclusion is that while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months thereafter, unless the downturn morphs into a deep recession.”

The ECB might just be stubborn enough to still cut rates again in September. However, they might run into a wall in trying to cut rates another time later this year.

The current market pricing shows ~44 bps of rate cuts for the year. And if it were to be a one and done case, there will be some repricing to do in markets.

In turn, that might offer a minor tailwind for the euro. That being said, if inflation pressures are holding higher while the economy continues to suffer later in the year, I fear that such prospects will outweigh everything else for the single currency. Can anyone say stagflation?

That’s a serious risk to consider and might leave a scar on the euro and regional assets as we get deeper into the second half of the year.

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

• Services PMI 52.4 vs. 52.5 expected and 52.1 prior.
• Manufacturing PMI 51.8 vs. 51.1 expected and 50.9 prior.
• Composite PMI 52.7 vs. 52.6 expected and 52.3 prior.

Key Findings:

• Flash UK PMI Composite Output Index(1) at 52.7 (Jun:
  52.3). 2-month high.
• Flash UK Services PMI Business Activity Index(2) at
  52.4 (Jun: 52.1). 2-month high.
• Flash UK Manufacturing Output Index(3) at 54.4
  (Jun: 53.3). 29-month high.
• Flash UK Manufacturing PMI(4) at 51.8 (Jun: 50.9).
  24-month high.

Comment:

Commenting on the flash PMI data, Chris Williamson,
Chief Business Economist at S&P Global Market
Intelligence said:

“The flash PMI survey data for July signal an encouraging
start to the second half of the year, with output, order
books and employment all growing at faster rates amid
rebounding business confidence, while price pressures
moderated.”

“The first post-election business survey paints a
welcoming picture for the new government, with
companies operating across manufacturing and services
having gained optimism about the future, reporting a
renewed surge in demand and taking on staff in greater
numbers. Prices have meanwhile risen at their lowest rate
for three and a half years, further raising the prospect of a
summer rate cut.”

“However, policymakers will likely take a cautious
approach to loosening policy amid signs of inflationary
pressures pivoting away from services towards
manufacturing, where Red Sea shipping delays and higher
freight prices are adding to costs again. The renewed
hiring trend could also add to pay pressures, sustaining
some stickiness of inflation in the coming months.”

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

• Prior 52.8
• Manufacturing PMI 45.6 vs 46.1 expected
• Prior 45.8
• Composite PMI 50.1 vs 51.1 expected
• Prior 50.9

The growth in the Eurozone economy has stalled in July, with services activity growing at a slower pace and manufacturing conditions continuing to dawdle. The former reading is a 4-month lower while the latter reading is a 7-month low. That suggests weaker economic sentiment in the euro area to kick start the second half of the year.

On the inflation front, input prices rose sharply to a 3-month high while output prices also increased but at a slightly softer pace. Meanwhile, cost prices continued to tick higher with selling prices also increasing particularly in the services sector. HCOB notes that:

“Is this the summer lull? It feels a bit like it as the Eurozone economy barely moved in July, according to the HCOB Flash
Eurozone PMI. But beside the fact that we are talking about seasonally adjusted figures, looking at the two monitored
sectors the situation deteriorated significantly in the manufacturing sector and counteracted moderate growth in the services
sector. According to our GDP Nowcast, growth in the third quarter is still on the cards, however.

“It’s unsettling how steadily companies in the manufacturing sector are slashing jobs month by month. The pace has barely
changed over the last ten months. As employment has broadly fallen at a slower rate than output, this hints at two things:
companies are a bit cautious about trimming staff as there may still be some hope for better times. And secondly, labour
productivity is diminishing which bodes ill for growth perspectives. As a result, an eventual recovery will likely be followed by
a rather large lag in employment growth.

“While Germany is seemingly struggling to grow, the French economy is being fueled by the Olympic Games. According to
anecdotal evidence, French service providers increased their business activity in July due to the preparation for the Olympic
Games. In contrast, demand in the German manufacturing sector seems to have dragged down overall private sector output.

“If only growth was considered, you find a strong argument for a rate cut in September by the ECB. However, prices data did
not provide hoped for relief. Input prices in the services sector increased at a faster rate and selling prices rose at a similar
pace to the previous survey period. To make things worse, input prices in manufacturing, which fell for more than a year
between March 2023 and May 2024, have now increased for two months straight. Output prices fell only fractionally, which
may make it more difficult for overall inflation to make the necessary progress towards the 2 percent target. Our conclusion
is that while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months
thereafter, unless the downturn morphs into a deep recession.”

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

EUR/USD is now down 0.2% on the day to 1.0832 and looks poised for a further decline, at least from the charts. The dollar has been holding up better this week and the more sluggish risk mood is also helping with that in trading today.

Looking at the chart above, EUR/USD now looks on course for a push towards its 200-day moving average (blue line) next. The key level is seen at 1.0816 with the 100-day moving average (red line) not too far away at 1.0798 currently.

And a beat on the US PMI data later today could very well bring those levels into play.

Otherwise, traders will have to look for other factors to work with on the week. And they don’t have to look too far. Risk sentiment is on the defensive and that’s also a fuel for the dollar to some degree.

The DAX is down 0.9% and the CAC 40 down 1.5% currently. Meanwhile, S&P 500 futures are down 0.7% with Nasdaq futures down 1.0% on the day.

Despite the PMI readings, it’s still not a given that the ECB will be cutting rates in September. They want to, of course, but inflation data will be the main tell. And so, the wait continues. Currently, traders are pricing in ~61% odds of a rate cut in September.

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

• Services PMI 52.0 vs. 53.1 expected and 53.1 prior.
• Manufacturing PMI 42.6 vs. 44.0 expected and 43.5 prior.
• Composite PMI 48.7 vs. 50.7 expected and 50.4 prior.

Key Findings:

• HCOB Flash Germany Composite PMI Output Index(1) at 48.7 (June: 50.4). 4-month low.
• HCOB Flash Germany Services PMI Business Activity Index(2) at 52.0 (June: 53.1). 4-month low.
• HCOB Flash Germany Manufacturing PMI Output Index(4) at 42.2 (June: 45.1). 9-month low.
• HCOB Flash Germany Manufacturing PMI(3) at 42.6 (June: 43.5). 3-month low.

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“This looks like a serious problem. Germany’s economy fell back into contraction territory, dragged down by a steep and
dramatic fall in manufacturing output. The hope that this sector could benefit from a better global economic climate is
vanishing into thin air. With the composite PMI now below 50, our GDP Nowcast predicts that economic output will shrink by
0.4% in the third quarter compared to the second quarter. While it is still early days and many data points are yet to come,
the second half of the year is starting on a very weak note.”

“Improvement is not in sight in the manufacturing sector as new orders fell at the quickest rate in three months. This aligns
with the accelerated declines in the backlog of orders and the volume of purchased materials. The weakness in the
manufacturing sector appears to be persistent, with a potential rebound not expected until at least the fall of this year.”

“The elephant in the room is the various structural issues. With respect to the manufacturing sector, the main structural
challenges include labour market shortages, an investment backlog in infrastructure, a lack of digitalization, and relatively
high energy prices. However, the most significant factor impacting the German manufacturing sector is the increasing loss of
global market share of German car and machinery producers to competitors in China. Unfortunately, this problem is here to
stay.”

“Germany’s economic downturn is somewhat buffered by a still-growing service sector. However, the situation there is far
from comfortable. Firms have even cut jobs, and outstanding business declined faster than in the previous month. Moreover,
it appears that the mini boom in tourism, which could be associated with the European football championships, was already
over in July as new export business in services shrank.”

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