ForexLive European FX news wrap: Yen firms as yields fall, US CPI up next

Headlines:

• Yields fall reverberates to broader markets to start the day
• USD/JPY Technical Analysis – Expectations for a 50 bps cut remain alive
• What is the distribution of forecasts for the US CPI?
• BOJ’s Nakagawa: Hard to comment on timing of next rate hike
• Fed to cut rates by 25 bps at each of the remaining three policy meetings this year – poll
• UK July monthly GDP 0.0% vs +0.2% m/m expected
• US MBA mortgage applications w.e. 6 September +1.4% vs +1.6% prior

Markets:

• JPY leads, USD lag on the day
• European equities a touch higher; S&P 500 futures down 0.1%
• US 10-year yields down 2.6 bps to 3.618%
• Gold up 0.3% to $2,522.42
• WTI crude up 2.6% to $67.49
• Bitcoin down 1.4% to $56,770

The most interesting part of the session was during the handover from Asia to Europe. That came as bond yields dipped and cast a bid on the Japanese yen in FX. USD/JPY in particular fell through to test 141.00 before touching a low of 140.70 during the day. The pair then caught a bounce back after, trading back up to 141.70 now but still down by 0.5%.

As yields fell, it put some light pressure on equities as well. S&P 500 futures fell as much as 0.6% before recovering most of that to be down just 0.1% now.

Focusing back on the bond market, 2-year Treasury yields flirted with a break to its lowest level in over two years. Yields were down by as much as 6 bps to 3.55% at one point, before keeping modestly lower now at 3.58%. 10-year yields on the other hand fell further to 3.61% and is keeping thereabouts.

With Treasury yields falling, the dollar is the laggard on the day as such. EUR/USD is up 0.3% to 1.1050 while USD/CHF fell to 0.8422 initially before rebounding back a little to 0.8460 now. Meanwhile, AUD/USD is also seen up 0.3% to 0.6670 on the day.

In other markets, gold is also starting to eye a further breakout as it hovers near the topside of its recent range. The precious metal is up 0.3% to $2,522 now, with buyers on the edge of their seats in wanting to chase a breakout.

That will be another area to watch out for as we turn the focus and attention to the US CPI report later.

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