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The Treasury market continues to sniff out pain and rate cuts in the US economy and that’s spilling into USD/JPY. The pair fell 25 pips in a quick move down to 145.75 after breaking 146.00.

Despite the turnaround in risk sentiment, US 2s remain near the low yields of the year and are treatening a fresh break of 4.00%.

There is some talk about non-farm payrolls downward revisions tomorrow as a catalyst but that’s a widely expected shift at this point. Jackson Hole will include something of a dovish shift but that’s also widely expected.

The bond market may be looking at sagging global growth and betting that it will boomerang back in to the US. That said, that kind of price action doesn’t really square with a weak dollar.

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

Shares of home-improvement store Lowe’s initially fell more than 1% after the company cut its annual forecast but have since rebounded and are trading higher by 1%.

Shares of Home Depot reacted similarly this month after cutting guidance.

The company now sees a 3.5-4% drop in comp sales this year compared to 2-3% previously. It’s part of a broad trend of lower spending on housing and renovations due to higher US interest rates. That sector has been hit hard with Wayfair comparing the drop in sales to the 2008 financial crisis.

However the market reaction shows this is no longer a surprise and that the market is looking forward to lower rates and the cycle turning.

Yesterday I asked: Is housing the trade on a Kamala Harris government?

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

• The index increased by 0.1% year over year in July
• Prices were up in 10 of the 27 census metropolitan areas
• They were unchanged in 13 and declined in the remaining 4
• largest month-over-month increases in July were recorded in Calgary, Edmonton, Kelowna and Regina
• The largest monthly price declines in new home prices in July were recorded in Kitchener–Cambridge–Waterloo (-0.5%) and Ottawa (-0.2%)

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

The euro continues to march higher as it ticked above 1.11 for the first time since late December. Given that December move was something of a low-liquidity squeeze, you have to go back to July 2023 to see these levels.

Unfortunately, this is more of a US dollar story than a positive narrative on anything unfolding in Europe. US Treasury yields fell again today by 3-6 bps across the curve. The market is looking for some kind of dovish indication from Powell, though with Fed fund futures priced for nearly 100 bps over the remaining three meetings this year, I’d argue that pricing is already aggressive.

In any case, USD-longs (and bond shorts) have been a crowded position that’s unwinding in a thinner August market. That leaves me skeptical that we will get a rise above the July 2023 high of 1.1275.

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

The New York Fed yesterday released its quarterly survey of the employment market and there was a notable softening.

• Job seekers jump to 28.4% in July 2024, highest since March 2014
• The increase was most pronounced among respondents older than age 45, those without a college degree, and those with an annual household income less than $60,000.
• Job satisfaction down across wages, benefits, and promotion opportunities
• Unemployment expectations hit series high at 4.4%

The expected wage of job seekers also fell 3.2% y/y, with workers now anticipating offers around $65,272, down from $67,416 a year ago. This decline in wage expectations could signal softer labor market conditions ahead.

Job satisfaction also dropped, particularly among women, non-college grads, and lower-income households.

It’s not all bad news though, increased job seeking and a higher transition rate could indicate a dynamic jobs market with more opportunities. The reservation wage also rose from a year ago and the expected likelihood of receiving a job offer rose to 22.2% from 18.7% a year ago. This suggests optimism about job prospects.

On net though, falling job satisfaction and wage expectations are negative.

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

S&P 500 futures are 1 point higher today and Nasdaq futures are also higher.

Yesterday, they capped of an eight-day rally that’s added about 8%. The last time the S&P 500 climbed for eight days in a row was November 2023. That was capped by a decent decline on the ninth day and then a non-stop rip into year end.

Bespoke highlights how rare eight day winning streaks have been for both the SPX and NQ.

“Concurrent streaks of eight or more days in a row have been [uncommon] with just 15 since 1971, or about one every four years.”

One of the all-time greatest winning streaks was in March 2010, when the S&P 500 gained for 14 days in a row coming out of the financial crisis. Those gains ultimately proved fleeting as they all evaporated (and more) by June.

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

• Prior was +2.7%
• CPI m/m +0.4% vs +0.4% expected
• Prior m/m -0.1%

Core measures

• CPI Bank of Canada core y/y 1.7% vs 1.9% prior
• CPI Bank of Canada core m/m +0.3% versus -0.1% prior
• Core CPI m/m SA +0.1% vs +0.1% prior
• Median 2.4% versus 2.6% prior
• Trim 2.7% versus 2.9% prior
• Common 2.2% versus 2.3% prior

USD/CAD was trading at 1.3602 just ahead of the release and rose to 1.3619 afterwards on the declines in core inflation. The headline y/y rise is the slowest pace since March 2021.

The overall decline was broad based, stemming from lower prices for travel tours, passenger vehicles and electricity. A 2.4% rise in gasoline prices boosted the m/m reading but will be fleeting given the recent fall in oil prices and cracks.

• Prices for passenger vehicles fell 1.4% year over year in July
• Prices for used vehicles fell 5.7% y/y in July
• Prices for traveller accommodation (-3.7%) and air transportation (-2.7%) fell year over year in July, but both were up m/m
• Prices for shelter rose at a slower rate in July (+5.7%) compared with June (+6.2%)
• The mortgage interest cost index continued to slow year over year, up 21.0% in July compared with 22.3% in June

Given that home prices and falling in much of Canada, the only real source of inflation in the country is high interest rates.

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

The Canadian dollar is riding the wave of broad US dollar weakness at the moment in a move to 1.3610 but it will have its own reasons to move at the bottom of the hour.

That’s when the July CPI report will be released. Expectations are for y/y inflation to continue to fall, this time down to 2.5% from 2.7%. That’s despite what’s expected to be a +0.4% m/m reading.

The three measures of core inflation — median, trim and common — will also be a factor in the market reaction. They’re expected to tick slightly lower on a y/y basis.

For the Bank of Canada ,the market is pricing in a 99% chance of 25 bps on Sept 4 with a slight chance of 50 bps. Through year end, 72 bps are priced in with 151 bps priced in by this time next year, which would bring the overnight target to 3.00%.

With Canadian housing not responding to the two rate cuts so far and the economy slowing, I think the BOC has the opportunity to be more aggressive but I doubt that happens, even with a cool CPI. Given that, I wouldn’t expect a big move on today’s data.

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

• Will the Jackson Hole event be bearish for stocks?
• Bundesbank says wage growth has slowed down in Q2
• Eurozone July final CPI +2.6% vs +2.6% y/y prelim
• Dollar on troubled shores so far this week
• Eurozone June current account balance €51.0 billion vs €36.7 billion prior
• European equities open marginally higher to kick start the day
• What are the main events for today?
• Eurostoxx futures +0.1% in early European trading
• Germany July PPI +0.2% vs +0.2% m/m expected
• Switzerland July trade balance CHF 4.89 billion vs CHF 6.18 billion prior
• Gold breakout holds more tentative for now
• The Trump-Harris debate for 4 September will no longer take place
• Not too much on the agenda in European trading later today

Markets:

• NZD leads, EUR lags on the day
• European equities mostly flat;
  S&P 500 futures slightly higher
• US 10-year yields up 10 bps to
  3.875%
• Gold
  up 0.8% to $2,523.80
• WTI
  crude up 0.38% to $73.87
• Bitcoin
  up 1.8% to $60,562

It was
another slow session due to the lack of key economic releases. The sentiment in
the markets remains mostly positive as everyone’s looking forward to Fed Chair
Powell’s speech on Friday expecting a pre-commitment to a rate cut in
September.

In the FX
market, the major pairs are basically flat on the day with the USD remaining on
the backfoot amid the risk-on sentiment. Equities continue to benefit from the
prospects of rate cuts into resilient growth as that should boost economic
activity.

Gold has
been another notable mover in the past few days as it reached a new all-time
high. The Fed’s monetary policy trajectory is one of the main drivers of the
precious metal as it influences real yields.

The recent crude oil
weakness, on the other hand, has been a head-scratcher but I can see the
pricing out of the geopolitical risk premium as the main reason as lots of time has passed
and we haven’t got any Iran retaliation.

Bitcoin should
be another major beneficiary of the easing cycle into resilient growth as it’s
basically digital gold on steroids.

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

I’ve been seeing many posts about the stock market reaction to the last two Powell’s speeches at the Jackson Hole Symposium.

While it’s true that the market didn’t perform well in the following couple of months, the context today is much different.

In 2022, it goes without saying why it was different. The Fed was still in the middle of its hiking cycle and Powell delivered a very hawkish message.

In 2023, it wasn’t actually the Jackson Hole event that triggered the weakness. It was first the hot CPI on Thursday 14th and then the much more hawkish than expected FOMC on Wednesday 20th.

Even without those two catalysts in 2023, the market diverged pretty strongly from real yields and eventually it just caught up to the reality before bottoming out and resuming the rally into the December’s Fed pivot.

Right now, we are actually entering the easing cycle with resilient growth which is a strong tailwind for stocks as that should depress real yields and boost economic activity.

So, while we can’t know for sure how the market’s going to perform in the next couple of months, I’d say that this time a rally is more likely.

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

• Prior +2.5%
• Core CPI +2.9% vs +2.9% y/y prelim
• Prior +2.9%

No changes to the initial estimates and this just keeps a September rate cut in play for the ECB after the pause in July.

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

The post Ex-Dividend 21/08/2024 first appeared on IC Markets | Official Blog.