• Treasury yields continue to climb towards the end of the week
• UAW strikes kick off, plants at each of the three legacy Detroit carmakers affected
• ECB hawks trying to keep the door open for more rate hikes
• ECB’s Lagarde: We will set rates at restrictive level for as long as needed
• ECB’s Lagarde: We have not discussed rate cuts
• ECB’s Kazaks: Latest monetary policy move was not a ‚dovish hike‘
• Eurozone July trade balance €6.5 billion vs €23.0 billion prior
• France August final CPI +4.9% vs +4.8% y/y prelim
• Italy August final CPI +5.4% vs +5.5% y/y prelim

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.1%
• US 10-year yields up 3.2 bps to 4.322%
• Gold up 0.5% to $1,919.35
• WTI crude up 0.5% to $90.63
• Bitcoin down 0.3% to $26,502

It was a slower session overall as markets settle down in trying to get used to the new shift in the narrative among major central banks.

With the ECB signaling the end of rate hikes, it is now all about focusing on if central banks can stick with their perceived stance of higher rates for longer in the months ahead.

But that did not stop the move higher in bond yields though, as 10-year Treasury yields are up to above 4.32% and set for its highest weekly close since 2007.

That is helping to underpin USD/JPY with the pair up 0.2% to 147.80 but the dollar in general is sitting more mixed on the day. The overall changes are light with the greenback just marginally higher against the franc and loonie as well but down against the euro and aussie.

In the equities space, European stocks are continuing to race higher as rate hikes are out of the picture now for the ECB.

And in the commodities space, oil is continuing its run to the upside with WTI above $90 and that could play into inflation fears if the trend continues.

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

US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US CPI this
  week came in line with expectations, so the market’s pricing remained roughly
  the same.
• The labour market
  displayed signs of softening although it remains fairly solid.
• Last week the ISM Services PMI and Jobless Claims
  surprised to the upside, which point to a resilient economy overall.
• Yesterday, we got yet another beat in Jobless Claims followed
  by strong Retail Sales and PPI data.
• The Fed members are leaning more towards a pause in
  September and the next decision will still be dictated by the economic data.
• The market doesn’t expect the Fed to hike at the
  September meeting and there’s just a 33% chance of a hike in November, although
  that can change if the data keeps on running hot.

New Zealand:

• The RBNZ kept its official cash rate unchanged at the
  last meeting while stating that it will remain at the restrictive level for the
  foreseeable future to ensure that inflation comes down back to target.
• The recent New Zealand inflation and employment data surprised to the upside but
  the PMIs are in contraction with the Services PMI recently plunging into contraction.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely for
  second round effects.
• The New Zealand Retail Sales beat expectations although the data
  remains deeply negative.
• Today, the Manufacturing PMI showed further contraction.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD has been
diverging with the
MACD since
the breakout and this is generally a sign of weakening momentum often followed
by pullbacks or reversals. In this case, we are seeing a pullback with the
sellers leaning on the red 21 moving average to
position for another selloff. If the price breaks above the moving average, we
can expect the sellers to pile in around the 0.5987 resistance which
would give them an even better risk to reward setup.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price
action has been choppy but the pair is trading between key levels with an
upward tilt given that the price has been printing higher highs and higher lows
with the moving averages being crossed to the upside. A break above the 0.5930
resistance should lead to a rally into the 0.5987 resistance, while a break
below the 0.5892 support should result in a fall into new lows.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the short term price action between the key levels. We now have a range
between the 0.5930 resistance and the 0.5892 support. A break to the upside is
bullish, while a break to the downside is bearish.

Upcoming Events

Today the only notable
report left to be released for this week is the University of Michigan Consumer
sentiment survey. Consumer sentiment might have deteriorated given higher
energy prices and that might have filtered to higher inflation expectations.

This article was written by FL Contributors at www.forexlive.com.

• What we do next on rates will be on a data-dependent basis

If euro area economic data continues to worsen at the current pace, don’t expect talks of a rate cut to go away any time soon.

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

• It does not preclude future decisions
• Comfortable with current level of rates
• Sees inflation target being reached in 2H 2025
• April rate cut would be inconsistent with ECB’s macro scenario

On the headline, I reckon that interpretation is not up to him or the ECB to make. It is how their actions and communication is perceived by markets and it is what it is. So, you don’t get to go around telling people what it should be. Besides this report earlier, there hasn’t been any explicit remarks on any more rate hikes and that says a lot about the ECB’s current stance as a whole.

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

• We will return to 2% inflation target
• To set rates at restrictive level as long as needed for that
• Eurozone will not grow as much as expected earlier, but should pick up in 2024
• Weaker growth does not mean recession

She’s not really offering too much pushback or explicitly keeping the door open for another rate hike, similar to yesterday. As for the likelihood of a recession, let’s just say it never is a good sign when policymakers have to mention the R-word itself in trying to defend their stance.

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