<ul><li>Rate hike has been well transmitted to money markets</li><li style=““ class=“text-align-justify“>Appropriate monetary policy should take into account that energy shock remains a dominant force</li><li style=““ class=“text-align-justify“>Eurozone inflation drivers are different compared to demand-driven overheating dynamics</li><li style=““ class=“text-align-justify“>Inflation dynamics associated with energy shock component are what we are exposed to</li></ul><p style=““ class=“text-align-justify“>It’s a fair point but so long as energy prices are soaring and supply-side issues are yet to return back to pre-pandemic conditions, there is going to be spillovers to core prices and that will in turn keep inflation more embedded in the economy. But I guess Lane is making a point that monetary policy will eventually reach a point where it will follow the path of energy prices in general – not now though.</p>

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

<ul><li>Prior -0.8%</li><li>Market index 255.0 vs 258.1 prior</li><li>Purchase index 198.1 vs 197.8 prior</li><li>Refinancing index 532.9 vs 556.4 prior</li><li>30-year mortgage rate 6.01% vs 5.94% prior</li></ul><p style=““ class=“text-align-justify“>The standout detail is that the average interest rate for the most popular US home loan rose above 6% for the first time since 2008, more than doubling the level it was a year ago. Mortgage activity continued to decline, largely as a result from a fall in refinancing this week as the housing sector continues to feel the impact of higher rates in general. And we can still look forward to another 75 bps rate hike by the Fed next week. Fun.</p><p>/<a target=“_blank“ href=“https://www.forexlive.com/terms/u/us-dollar/“ target=“_blank“ id=“fddda8f4-d5f8-4ee4-8e34-3760ed062f3c_1″ class=“terms__main-term“>US dollar</a></p>

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

<p style=““ class=“text-align-justify“>With Europe having to play catch up to the washout in Wall Street yesterday, US futures are finding some relief at least but the question seems to be how long can it last?</p><p style=““ class=“text-align-justify“>The snapshot of the performance of US stocks yesterday was abysmal to say the least with the S&P 500 closing down 4.3%, Nasdaq down 5.2%, and the Dow down 3.9% at the end of the day. For the latter, it is the lowest daily close since 18 July while the former two are closing in on their 6 September lows respectively.</p><p style=““ class=“text-align-justify“>In the case of the S&P 500, that coincides with the 61.8 Fib retracement level of the bounce from June to August near 3,900. The confluence of support levels will make it more interesting, with a break below that likely to set off the next downside leg for equities.</p><p style=““ class=“text-align-justify“>For now, there is some bit part relief with S&P 500 futures up 0.5%, Nasdaq futures up 0.6%, and Dow futures up 0.4%. However, with US PPI data and Wall Street set to enter the fray later, the picture might easily turn around if Fed fears are reignited in the second-half of the week.</p>

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

<ul><li>If Tokyo were to intervene, it will do so swiftly and without pause</li><li>Usually will not confirm if it had intervened, even after doing so</li><li>No comment on BOJ rate check</li><li>Will not rule out any options (when asked about chance of FX intervention)</li><li>Government watching FX moves with high sense of urgency</li><li>If yen continues such moves, we will take necessary action</li></ul><p style=““ class=“text-align-justify“>They have certainly stepped up the offensive in terms of jawboning the market, with officials coming out today in full force pretty much. That said, the rhetoric is getting a bit tiresome rather quickly considering the frequency and that might see markets shrug off the threats after a while. In my view, this is the limit to their verbal intervention and that seems to be around the 145.00 mark for USD/JPY.</p>

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

<ul><li>Prior +0.7%</li><li>Industrial production -2.4% vs +0.4% y/y expected</li><li>Prior +2.4%</li></ul><p style=““ class=“text-align-justify“>That’s a big miss on estimates as euro area industrial output slumped heavily in July. Looking at the details, production of capital goods fell by 4.2%, durable
consumer goods by 1.6% and intermediate goods by 0.8%, while production of energy rose by 0.4% and nondurable consumer goods by 1.2%.</p>

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