Articles

• New York Fed: 1 year inflation expectations unchanged at 3.0%.3-year up to 2.5% from 2.3%
• US wholesale sales +1.1% vs +0.2% expected
• US August employment trends 109.04 vs 109.61 prior
• Citigroup CFO Mason: Feels good about consumer and corporate balance sheets
• Atlanta Fed GDPNow growth estimate for Q3 comes in at 2.5%
• Mark Carney will head Liberal advisory task force
• US July consumer credit outstanding +25.45B vs +2.0B expected

Markets:

• Gold up $8 to $2504
• US 10-year yields down 0.8 bps to 3.70%
• WTI crude oil up 95-cents to $68.62
• S&P 500 up 1.2%
• USD leads, NZD lags

Friday’s US dollar strength continued onto Monday despite a much better risk mood. It’s not often you see NZD at the bottom of the FX pile on a day when the S&P 500 rises more than 1%. That speaks to a market that’s sorting out cross currents.

Economic data was a non-factor and the Fed is in the blackout so the only thing to do was consider Fed possibilities and prepare for the US Presidential debate Tuesday and CPI on Wednesday. Bonds sold off early but recovered strongly as the day wore on despite some supply coming this week in 3s, 10s and 30s.

Cable was soft as it broke last week’s lows and fell to 1.3069 and is on track to close near the worst levels. The euro held last week’s lows but was pressured lower of the second day in a broad USD rally.

USD/JPY has made a standing at the August spike lows, bouncing off 142.00 for the second day in a sign that the market might be waiting for the FOMC or some other nudge to break the range.

Overall, there were some decent moves today despite the lack of data or news in a sign of a market that’s struggling to find direction.

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

Chinese trade data is usually of interest. Expectations for the data today are for lower y/y result for both exports and imports. If exports come in as expected it’ll be the slowest growth in 4 months. There was a narrative about that exports would surge ahead of increased trade barriers, which has not turned out to be accurate. Still, it could get worse! Imports, too, are expected to have slowed. The narrative surrounding this was that the surge China has had in imports has been p[partially due to bringing in chips ahead of tighter curbs. This seems a little better supported in the data.

Australian business conditions and confidence are due. Of most interest in these figures will likely be how businesses are viewing employment and inflation developments … which of course comprise the two Reserve Bank of Australia mandates.

• 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.
• I’ve noted data for New Zealand and Australia with text as the similarity of the little flags can sometimes be confusing.

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.

On the day:

• S&P 500 +1.2%
• Nasdaq Comp +1.1%
• DJIA +1.2%
• Russell 2000 +0.4%
• Toronto TSX Comp +1.1%

These gains aren’t enough to recoup Friday’s losses and last week’s big decline but it’s a good start.

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

• Prior was +8.93B (revised to +5.23B)

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

Eyes remain on the bond market this week as strengthening demand for safety runs into rising supply. The ability of the market to digest rates at the lowest levels of the year will be tested again this week with elections coming up over the next three days:

• Tuesday – $58 billion of 3s
• Wednesday $39 billion of 10s
• Thursday $22 billion of 30s

The 3s sale tomorrow is up against a bare economic calendar while the 10s on Wednesday follow the August CPI report. It also comes after Tuesday’s Presidential debate, which should remind everyone that deficits will stay high no matter who Americans pick.

I’ve been very bullish on bonds recently and yields have moved down as much as any of the bulls could have hoped for. This is a real test though with 10s currently trading about 25 bps below last month’s sale at 3.960%.

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

Goldman Sachs expresses caution on holding tactical long positions in the Japanese yen (ie short USD/JPY) in the near term, despite its attractiveness as a hedge against a slowing US economy and potential recession risks.

Key Points:

• Economic Context:

  • US Economy: Slowing economic conditions and increased recession risks make the Yen a favorable hedge.
  • Macro Forecasts: More balanced macro forecasts suggest the USD/JPY cross may trend higher, limiting significant upside for the Yen.

• Factors Influencing JPY Outlook:

  • Interest Rates and Risk Sentiment: If rates remain stable and risk sentiment remains supportive, recent Yen strength could unwind.
  • US Activity Data: Continued softening in US economic data or difficulties in equities adjusting to gradual Fed cuts could lead to further Yen appreciation.
  • BoJ Policy: Any JPY gains might offset potential Bank of Japan (BoJ) hikes.

• Cautionary Notes:

  • Tactical Longs: Goldman Sachs advises caution on tactical long positions in the Yen, highlighting vulnerability to potential upside surprises in US retail sales.
  • Fed Outlook: The Yen’s attractiveness as a hedge is contingent on the Fed’s policy trajectory; shifts in Fed expectations could impact JPY dynamics.

Conclusion:

Goldman Sachs remains cautious on tactical long positions in the Yen despite its role as a hedge against a slowing US economy. They anticipate potential Yen strength may be limited if current economic and risk conditions persist, and any tactical long positions could be vulnerable to unexpected positive developments in US retail sales or shifts in Fed policy.

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

BofA anticipates the European Central Bank (ECB) will implement a 25 basis point (bp) cut to the deposit rate at its September meeting, with a modestly negative impact on the EUR due to unchanged guidance and weaker growth outlook.

Key Points:

• Rate Cut Expectation:

  • Deposit Rate: Expected to be reduced by 25bp.
  • Other Policy Rates: Likely to adjust by 35bp due to the previously announced narrowing of the rate corridor.

• Guidance and Statement:

  • Assessment: The statement will likely acknowledge that incoming information supports the ECB’s previous inflation outlook but highlights weaker growth.
  • New Forecasts: Expected to show lower growth projections, a slight increase in near-term core inflation, and an unchanged medium-term outlook. Inflation is anticipated to approach 2% by the end of 2025.
  • Domestic Price Pressures: Expected to be flagged, particularly in relation to high services price inflation.

• Forward Guidance:

  • Approach: The ECB is likely to maintain its data-dependent, meeting-by-meeting approach to policy adjustments.
  • Risks: There may be a slight dovish tilt given the weakening growth outlook and internal discussions about whether this necessitates faster rate cuts.

• Impact on EUR:

  • Expectations: A 25bp rate cut is fully anticipated, so a significant market reaction is not expected.
  • Risks: There could be modestly negative risks related to the ECB’s guidance on growth concerns.

Conclusion:

BofA predicts a 25bp rate cut by the ECB with no significant change in guidance, leading to a limited impact on the EUR. The focus will remain on the data-dependence of future policy actions, with risks skewed towards a potentially more dovish stance due to weaker growth projections. The EUR’s reaction is expected to be contained, reflecting the ECB’s consistent approach to data-driven decision-making.

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

Crude oil futures are trading to new session high, up $1.20 or 1.77% at $68.87.

Looking at the hourly chart, the price is moving back toward the falling 100 hour moving average. That level comes in at $69.43. The price fell below that moving average on Friday, August 30, and has trended to the downside since then. The move lower last week came despite OPEC saying that they wouldn’t increase production, and also a large build in the weekly crude oil inventory data.

Concerns about growth weighed on the price. The low price reached $67.17 and then $67.31.

On a move above the 100-hour moving average, the 38.2% retracement of the last move down from the August 26 high comes in at $71.15. That is near a swing area between $71.41 and $71.67.

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

Major European indices are closing the day higher, led by the UK’s FTSE 100.

A snapshot of the closing levels shows:

• German DAX, +0.71%
• France’s CAC +0.99%
• UK’s FTSE 100 +1.09%
• Spain’s Ibex +0.89%
• Italy’s FTSE MIB +0.90%

last week, major indices closed lower:

• German DAX -3.0%
• France’s CAC -3.65%
• UK’s FTSE 100 -2.33%
• Spain’s Ibex, -2.01%
• Italy’s FTSE MIB, -3.15%

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

Citigroup CFO Mark Mason is speaking on the state of banking and with it the economy.

He says:

• Feels good about consumer corporate balance sheets
• Expect a soft landing with the decline in rates consumer payment rates are coming down
• Have seen a pickup and revolving credit and credit card customers
• Credit card customers are moving from discretionary to spending on staples
• He sees Q3 market revenue down -4% year on year and net interest income guidance looks modestly down YoY as well

The comments are sending the stock lower on guidance. Shares are trading down $0.53 or -0.83% at $58.59. The high price reached $60.67 earlier today

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

A broad consensus in Canada has emerged and it’s inevitably going to wipe on Prime Minister Justin Trudeau and his Liberal Party: Canada is bringing in far too many people and can’t build the housing or infrastructure to support them.

Young people are brutally feeling the squeeze with Friday’s jobs report showing the unemployment rate for youth aged 15-24 up 3.2 percentage points year-over-year to 14.5% in August 2024. That’s the highest since 2012 and it’s 16.3% for men.

The short-term solution that voters want is to tighten, if not close the doors on immigration but in the long term, the solution is to build. But as National Bank shows in a chart today, Canada just isn’t very good at building. I’m not sure if it’s the composition of the labor force, a over-focus on white collar training or massive amounts of red tape but productivity in construction is now lower than it was 30 years ago.

These numbers highlight just how hard it will be to turn the Canadian economy around, as it’s increasingly limited by structural factors.

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