• US June core PCE inflation +4.1% y/y vs +4.2% expected
• Canada GDP for May +0.3% versus +0.3% expected
• US employment costs for Q2 1.0% versus 1.1% expected
• Germany July preliminary CPI +6.2% vs +6.2% y/y expected
• July final UMich US consumer sentiment 71.6 vs 72.6 expected
• Atlanta Fed GDPNow model starts Q3 growth at 3.5%
• Dallas Fed June trimmed mean price index falls to 2.5% m/m annualized versus 3.2% prior
• Former ECB VP says ’no need for more hikes‘
• Canadian Q2 GDP is tracking at about 1%
• Baker Hughes weekly US oil rig count -1

Markets:

• Gold up $14 to $1958
• US 10-year yields down 4.9 bps to 3.96%
• WTI crude oil up $0.33 to $80.42
• S&P 500 up 45 points, or 1.0%, to 4608
• GBP leads, JPY lags

The Bank of Japan offered plenty of volatility and drama to wrap up a busy week for central bankers but as the dust settled the market grew comfortable selling the yen. USD/JPY started US trade near 139.00 before finishing near 141.00 after several moves in that wide range in the past 24 hours.

Helping the move were lower yields after a goldilocks US PCE report and falling employment cost index.

Outside of the yen, trading wasn’t exactly straightforward as a positive risk trade certainly didn’t flow into commodity FX, perhaps owing to domestic concerns and month-end flows. USD/CAD finished slightly higher despite another gain in crude and a rip in equities. AUD/USD tried to mount a comeback in North America but made little progress and finished the day down 0.8% as the market frets about next week’s RBA decision.

The euro and pound finished higher but only recovered a portion of the drop a day earlier. The gains came early in Europe and it was mostly sideways in North America with volatility low compared to JPY trades.

Have a great weekend, it was certainly an interesting week. Note that the VIX is down to 13 as the market grows increasingly sanguine.

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

The major indices are ending the day with solid gains. The gains are led by the NASDAQ index which surged by 1.86%. The Dow industrial average was the laggard today, but still rebounded by 0.50% on the day. All the major indices are closing higher for the week.

The final numbers for the day are showing:

• Dow industrial average up 176.20 points or 0.50% at 35458.97
• S&P index up 44.76 points or 0.99% at 4582.16. The S&P closed at its highest level since January 2022.
• NASDAQ index up 266.54 points or 1.90% at 14316.65

The small-cap Russell 2000 is also solidly higher with a gain of 26.64 or 1.36% at 1981.53.

For the trading week, the NASDAQ index is leading the way with the largest gain this week. The Dow industrial average which ended a 13-day win streak yesterday closed higher for the week, but was the laggard of the major indices.

• Dow industrial average rose 0.66%
• S&P index rose 1.01%
• NASDAQ index rose 2.02%

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

As we finish the trading week and look toward the new trading week, the sellers are more in control in the AUDUSD. The bias is more to the downside on both the daily and hourly chart.

Having said that, the pair has been mostly in an up-and-down trading range over the last 5 trading months.

With the bias down, what would tilt the bias more to the upside, and if those levels can’t be breached, what would get the price outside the 5-month up and down trading range.

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

As the dust settles from the Bank of Japan USD/JPY is rising above 141.00 and I think that’s the right trade. A week ago, I warned not to chase USD/JPY as it rose to 141.73 and we got a retracement all the way to 138.06 on a series of leaks and a messy trade. It certainly wasn’t easy but at the time I wrote:

I think the trade for the BOJ is to wait and see what they deliver and
if it’s yet-another kicking of the can on YCC, then buy USD/JPY with
both hands and dare the MoF to defend 145.00.

We didn’t exactly get a kicking of the can but that’s still the strategy. Whether YCC is 0.50% or 1.00% it’s still far lower than anything you’re getting in US 10s and every other developed economy. Yes, that spread has narrowed and that counts for something but at the same time, US rates are moving up on a strong economy so net-net it’s USD/JPY bullish.

Even more compelling is that now some of the headline risk is gone. The games the BOJ played were pure amateur hour and I can’t see any sense in the leaks and most-everything else Ueda has said in the past two weeks.

I spoke to Reuters today and offered some colourful language:

„This may be the first step towards a credibility crisis for the Bank of
Japan and that is really dangerous. They’re on the tightest of
tightropes above the pit of alligators. This is the first wobble, and
the Bank of Japan cannot afford to lose any of its credibility. I think
that’s the big reason why we still see so much volatility.“

What I’m talking about there is the monstrous amount of government debt in Japan and the further mountain of debt priced on it. The whole thing is held together by the assumption of low inflation and BOJ credibility.

That’s an enormous responsibility that the BOJ is dealing with. Maybe they somehow survive this round of global inflation but when Ueda says that risks remain towards too-low inflation, I shake my head. Too-low inflation isn’t perfect but it’s hardly an existential crisis. Meanwhile, if Japanese inflation went to UK-like rates, it would be catastrophic and the pain would reverberate through the financial system globally. I don’t understand why they want to take that kind of risk but — fine — perhaps Japanese consumers continue to defy the laws of economics. But even if you think that risk is minimal you can’t be sitting at the BOJ and leaking stuff all over the place then delivering some kind of convoluted decision that pretends a 0.50% cap that now extends to 1.00% hasn’t changed.

In any case, traders trade and the path for the yen is higher until the Ministry of Finance says it’s not. Given the booming risk trade, I can’t see any reason to buy the yen or to take off USD/JPY longs.

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

The Fed is out with a report with some suggestions for banks in raising liquidity.

• Banks should ensure they are familiar with the pledging process for different collateral types and be aware that pre-pledging collateral can be useful if liquidity needs to arise quickly
• Banks should consider small value discount window transactions at regular intervals
• Events of H1 underscore importance of liquidity risk management and contingency planning

This is good advice that banks will certainly ignore.

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