<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/icymi-ecb-policymakers-see-growing-probability-of-rates-moving-to-restrictive-territory-20220912/“>ICYMI: ECB policymakers see growing probability of rates moving to „restrictive territory“</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/euro-looks-to-come-up-for-air-20220912/“>Euro looks to come up for air</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/uk-july-monthly-gdp-02-vs-04-mm-expected-20220912/“>UK July monthly GDP +0.2% vs +0.4% m/m expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/frances-le-maire-government-cant-bear-all-of-the-energy-price-increase-20220912/“>France’s Le Maire: Government can’t bear all of the energy price increase</a></li></ul><p>Markets:</p><ul><li>EUR leads, USD lags on the day</li><li>European equities higher; S&P 500 futures up 0.5%</li><li>US 10-year yields down 3.4 bps to 3.287%</li><li>Gold up 0.8% to $1,729.13</li><li>WTI crude up 0.6% to $87.32</li><li>Bitcoin up 4.8% to $22,310</li></ul><p style=““ class=“text-align-justify“>The euro and broader market sentiment is cheering the start of the new week as the single currency looks to come up for air amid a technical break above 1.0100 against the dollar. There was a decent gap higher at the open today and the euro has built on that during the session, touching a high of 1.0197.</p><p style=““ class=“text-align-justify“>One can point to more hawkish talk by ECB policymakers or just general positive developments from the Russia-Ukraine conflict as the latter is making some gains. But I’d rather just let the charts do the talking as the momentum carries over from last week.</p><p style=““ class=“text-align-justify“>USD/JPY also initially tracked higher to 143.49 but ran into near-term resistance before falling back now to 142.45, pitting the dollar as the weakest performer on the day now.</p><p style=““ class=“text-align-justify“>Meanwhile, GBP/USD also opened with a gap higher around 1.1640 before pushing higher towards 1.1700. The dollar was initially holding its own against the commodity currencies but as risk sentiment picked up, the greenback also fell against the group.</p><p style=““ class=“text-align-justify“>USD/CAD declined from 1.3020 to 1.2990 while AUD/USD ran up from 0.6840 to 0.6885 on the session.</p><p style=““ class=“text-align-justify“>The mood carries over from last week but we will have to see what the US CPI data tomorrow has to offer as that will set the tone for the rest of the week surely.</p>

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

<p style=““ class=“text-align-justify“>That said, the firm has taken a more optimistic approach by arguing that „stronger incoming data have led us to revise our outlook for the US economy in favour of a longer expansion“. Adding that „we have pushed our outlook for a mild recession in the US to begin in 1H 2023, versus late 2022 previously“. Here’s a look at how they are viewing the jobs market:</p>

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

<p style=““ class=“text-align-justify“>That’s a tough pill to swallow and Russia is quite literally laughing its way to the bank, as one can say. In July, Germany imported goods from Russia totalling a value of €2.9 billion. That amount is 10.2% higher than the value of imports seen in July 2021.</p><p style=““ class=“text-align-justify“>Of course, the main reason for the surge in imports value can be attributed to soaring energy costs with the German stats office noting that crude oil and natural gas imports totalled €1.4 billion (+1.6% y/y), coke and petroleum products totalled €0.5 billion (+72.5% y/y), and coal totalled €0.3 billion (more than double in value).</p><p style=““ class=“text-align-justify“>As for total trade volume, Germany did manage to reduce imports from Russia by 45.8%.</p>

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

<p style=““ class=“text-align-justify“>The pair is up 0.9% on the day to near 1.1700 currently as the bounce from key support at the March 2020 lows near 1.1400 continues to extend. The initial bounce stalled around the 23.6 Fib retracement level at 1.1610 but we are running above that now with the 38.2 Fib retracement level next seen at 1.1737:</p><p style=““ class=“text-align-justify“>As such, there is scope for cable to extend the latest bounce here amid a correction in the dollar and the pound finding some light relief from the government’s fiscal aid on energy prices.</p><p style=““ class=“text-align-justify“>Despite the latest recovery, it is hard to be convinced of a major turnaround in cable unless the government really is going to abandon fiscal responsibility and throw the kitchen sink at propping up the economy. The issue here is that during the pandemic, monetary policy worked in tandem as interest rates were cut; now it is quite the opposite.</p><p style=““ class=“text-align-justify“>That’s a costly thing to consider and it won’t bode well for the UK’s long-term fundamentals i.e. from a current account perspective.</p><p style=““ class=“text-align-justify“>In any case, I would pin any move closer to 1.1800 to start inviting short positions again – so long as the balance of things remain as they are at the moment. For this week, be wary of the US CPI data release tomorrow. That will also help to set the tone before we get to the FOMC meeting next week.</p>

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

<p class=“MsoNormal“>UPCOMING
EVENTS:</p><p class=“MsoNormal“>Tuesday:
US CPI</p><p class=“MsoNormal“>Last week we
saw some messy and ranging price action in the major currency pairs. The USD
gained in the beginning of the week, only to give it back at the end of it. The
major events were the US ISM Services PMI and some FedSpeak. The former
surprised with an overall good-looking report and the prices paid component
didn’t help much as it remained high, while the latter pretty much sealed a 75
bps hike coming at the September meeting with more Fed members leaning for the
bigger move. In fact, the market now sees a 91% probability for a 75 bps hike. The
FOMC is in blackout period since last Saturday.</p><p class=“MsoNormal“>The only
thing that can change this expectation is the US CPI report coming this week on
Tuesday. Nothing else will matter. The CPI M/M figure is expected to show a
negative reading at -0.1%, which would be the first M/M decline in two years
thanks to cooling energy prices. The Core M/M though is expected to show a 0.4%
increase. The CPI Y/Y is expected to show a deceleration to 8.1% and the Core
reading to remain unchanged at 5.9%. </p><p class=“MsoNormal“>Needless to say,
that a beat on expectations should result in risk aversion in the market with
the USD bid as the Fed may be even less inclined to pause early its tightening
cycle due to the fear of being wrong. A miss on expectations should see a risk
rally and USD under pressure as the market may bring forward expectations of an
earlier than expected pause and subsequent cutting cycle. </p><p class=“MsoNormal“>A CPI miss
should also reprice the market expectations for a 75 bps hike at the September
meeting and bring it to a 50/50 split or even a higher probability of a 50 bps.
This will make the September FOMC rate decision very interesting because if
they follow yet again market consensus, financial conditions may ease again and
probably even faster than they would like, but if they want to show once and
for all that they are not “joking”, they may hike by an out of consensus 75 bps
and trigger a sell-off in risk. </p><p class=“MsoNormal“>This article
was written by Giuseppe Dellamotta.</p>

This article was written by ForexLive at forexlive.com.