UPCOMING EVENTS:

• Monday: NZ
  Services PMI, US NAHB Housing Market Index.
• Tuesday: RBA
  Meeting Minutes, Canada CPI, US Building Permits and Housing Starts.
• Wednesday: PBoC
  LPR, UK CPI, BoC Summary of Deliberations, FOMC Policy Decision.
• Thursday: NZ
  GDP, SNB Policy Decision, BoE Policy Decision, US Jobless Claims.
• Friday: Japan
  CPI, BoJ Policy Decision, UK Retail Sales, Canada Retail Sales, Flash PMIs
  for AU, JP, UK, EZ, US.

Tuesday

The Canadian Headline CPI Y/Y is expected
to tick higher to 3.8% vs. 3.3% prior, while the M/M reading is seen at 0.2%
vs. 0.6% prior. The BoC continues to complain about the slow disinflation in
the underlying measures, which beat expectations in the previous
months although they were lower than the
prior readings. There’s currently no consensus for the core measures but higher
figures would put the central bank in a tough position given the recent rise in
wage
growth.

Wednesday

The UK Headline CPI Y/Y is expected to
increase to 7.1% vs. 6.8% prior, while the M/M reading is seen at 0.7% vs.
-0.4% prior. Such a big increase is due to higher energy prices with the
central banks more focused on the core measures at the moment. The UK Core CPI
Y/Y is expected at 6.8% vs. 6.9% prior, while the M/M figure is seen at an
uncomfortable 0.7% vs. 0.3% prior. This report is unlikely to change the
market’s pricing for this week’s BoE meeting where the central bank is expected
to hike by 25 bps, but it will influence the expectations for the next
meetings.

The Fed is expected to hold rates steady
at 5.25-5.50% but the market’s focus will be on the Summary of Economic
Projections (SEP) and the Dot Plot to see if the central bank still sees the
need for another rate hike or it has reached its terminal rate already. As a
reminder, in the June
Dot Plot the Fed increased its terminal rate
projections by 50 bps to 5.6% from the previous 5.1% in March. The market
currently sees a 50/50 chance for another rate hike at the November meeting
given the strength in the economic data recently with rate cuts being priced
for Q3 2024.

Thursday

The SNB is expected to hold rates steady
at 1.75% given the weak economic data and both the headline and core inflation
measures being in the SNB’s 0-2% target band.

The BoE is expected to hike by 25 bps
bringing the bank rate to 5.50% with Dhingra being the usual dissenter. Recent
communication seems to be leaning more towards keeping interest rates high long
enough to let the tightening in the pipeline to come through. Nonetheless, the
central bank should keep all the options on the table given its inflation and
wage growth rates.

The US Jobless Claims beat expectations
once again the last
week as the labour market continues to
soften although it remains fairly tight. This week the consensus sees Initial
Claims at 225K vs. 220K prior and Continuing Claims at 1695K vs. 1688K prior.

Friday

The BoJ is expected to keep everything
unchanged with rates at -0.10% and YCC to target 10yr JGBs at 0% with a soft
cap at -/+0.50% and a hard cap at 1.00%. The yield on the 10yr recently spiked
to 0.70% following BoJ
Governor Ueda comments about a “quiet exit”
from NIRP if the data supports such a move. The BoJ, of course, intervened by
buying unlimited amount of JGBs last week as they already repeated many times
that they will do so if the pace of the moves is too fast. Moreover, the wage
growth data continues to point to a slowdown, and this is something that the
BoJ watches very carefully.

The Flash PMIs are usually big market
movers as they are the most important leading indicators we have. The market
should focus on the Eurozone and the US PMIs, with the latter likely to have a
bigger impact on global markets depending on the outcome. The US Manufacturing
PMI is expected to match the prior reading at 47.9, while the Services PMI is
seen lower at 50.3 vs. 50.5 prior.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• General Motors says it expects to run out of parts at Kansas plant as soon as next week
• Broader US indices tumble and close lower on the week
• S&P and NASDAQ close lower on the week after sharp declines today
• WTI crude futures settle at $90.77. What are the technicals telling traders?
• The electric car race is shaping up to be one of the all-time economic battles
• Baker Hughes US oil rig count 515 vs 513 prior
• Challenger: US labor market is starting to cool and employer’s are hiring at a slower clip
• European equity close: UK stocks wrap up a stellar week with gains
• Following the Fed is a good clue on when to buy bonds
• RBC: Navigating the CHF landscape amid SNB’s upcoming neeting and USD/CHF dynamics
• US Sept prelim UMich consumer sentiment 67.7 vs 69.1 expected
• US stocks decline at the open as we head into a super-soft seasonal period
• US August industrial production +0.4% vs +0.1% expected
• US August import prices +0.5% vs +0.3% m/m expected
• US Empire Fed manufacturing index for September 1.90 versus -10.00 estimate
• Canada July manufacturing sales +1.6% vs +0.7% expected
• The AUD is the strongest and the JPY is the weakest as the NA session begins
• ForexLive European FX news wrap: Dollar mixed, yields hold higher still
• ECB’s Lagarde: We have not discussed rate cuts
• ECB’s Kazaks: Latest monetary policy move was not a ‚dovish hike‘
• ECB’s Lagarde: We will set rates at restrictive level for as long as needed

The EUR is ending the day as the strongest of the major currencies. The USD is also mostly higher with gains vs all the major currencies with the exception of the EUR. The JPY and the NZD were the weakest of the majors.

The gains in the EUR come a day after the ECB raised rates by 25 basis points (10th consecutive hike in rates). Next week, the Fed will meet on Wednesday. The expectations are for no change in policy.

The SNB and BOE on Thursday, will also meet with each expecting to raise rates by 25 basis points. The BOJ will meet on Friday. Traders will be eyeing to see if they are ready to tighten conditions.

It will be a big week for central banks next week.

Today’s move higher in the US dollar was helped by higher rates. Data in the US was mixed today with the:

• NY Fed Manufacturing stronger: The actual index is at 1.90, which is a significant improvement from the prior period’s -19.00, though it was expected to be -10.00.

• Import and Export Prices MM higher: The monthly import prices increased by 0.5%, surpassing the forecasted 0.3% and the previous month’s 0.4%. Export prices for the month rose by 1.3%, which is higher than the expected 0.4% and the previous 0.7%.

• Industrial Production MM stronger: Industrial production increased by 0.4% monthly, which is higher than the expected 0.1% and the prior 1.0%.

• Capacity Utilization SA stronger: The capacity utilization rate is 79.7%, slightly above the forecasted 79.3% and matching the prior period’s rate.

• U Mich Sentiment Prelim weaker: The preliminary sentiment index from the University of Michigan is 67.7, lower than the expected 69.1 and the prior 71.2.

• U Mich Conditions Prelim weaker: The conditions index stands at 69.8, compared to the expected 75.3 and the prior 77.4.

• U Mich Expectations Prelim modestly stronger: The expectations index is at 66.3, slightly above the forecasted 66.0 and below the prior 67.3.

• UMich 1Yr Inf Prelim lower: The 1-year inflation expectation came in at 3.1%, down from the prior 3.3%. while the 5 Yr inflation came in lower too at 2.7% vs 2.9% last month

In the US debt market, the weaker was ignored with yields moving higher across the yield curve:

• 2 year 5.0347%, up 2.1 basis points
• 5 year 4.4615%, up 4.3 basis points
• 10 year 4.334%, up 4.4 basis points
• 30 year 4.419%, up 3.4 basis points

For the trading week, yields were also higher, helping to push the DXY index higher on the week (although it was mixed vs the major currencies),

• 2 year rose 4.2 basis points
• 5 year rose 5.8 basis points
• 10 year rose 6.8 basis points and closed at the highest level since November 2007
• 30 year up 8.4 basis points and closed at the highest since April 2011.

In the forex this week, the DXY is closing the week at 105.33, up by a modest 0.26%. Nevertheless, the rise took the price to the highest level since the November 21, 2022 trading week.

Looking at the major currency pairs, the currencies were mixed. The USD was higher vs the:

• EUR, +0.36%
• GBP, +0.66%
• JPY, +0.036%
• CHF, +0.53%

The greenback lost ground this week vs the commodity currencies with declines vs the:

• CAD, down -0.86%
• AUD, down -0.83%
• NZD, down -0.23%

US stocks closes sharply lower with the broader indices leading the way. The Nasdaq was the weakest with a decline of 1.56%, while the S&P fell -1.22%. The Dow industrial average fared relatively better with a decline of -0.83% but only 3 of the 30 Dow stocks advanced.

For the trading week, the declines today, shifted the fortunes of the Nasdaq and the S&P into the red. The Nasdaq fell -0.39% while the S&P fell -0.16%. The Dow eked out a small 0.12% gain on the week.

European indices closed the day and week higher:

• German Dax rose 0.56% today and 0.97% for the week
• France’s Cac rose 0.96% today and 1.91% for the week
• UK’s FTSE 100 rose 0.50% and surged 3.12% this week
• Spain’s Ibex rose 0.01% today and rose 1.98% this week.

IN other markets:

• Crude oil did turn into negative territory intraday but is trading up $0.61 or 0.68% at $90.77. For the week, crude oil closed higher for the 3rd consecutive week adding 3.73% today
• Gold moved higher by $13.93 today and was up 0.29% on the week
• Silver rose 1.8% today and rose 0.50% on the week.

IN the digital currency Bitcoin, the price is trading at $26482 currently after trading quietly between $26228 to $26683.

Hoping you all have a good weekend. Thank you for your support. Next week will be dominated by the Fed, BOE SNB and Bank of Japan from Wednesday to Friday.

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

General Motors is out saying that it expects to run out of parts at Kansas plant as soon as next week. This is because of the Missouri plant strike.

The ship shortage from Covid, led to a shortage of autos for a few years and also to higher prices for used and new cars. The auto strike now threatened supply once again if it continues. Also of concern is that prices which are already up sharply, will continue the upward trajectory leading to higher inflation down the road.

The Federal Reserve will announce her interest rate decision on Wednesday at 2 PM ET. CPI inflation year on year rose to 3.7% from 3.2%, and sits well above the 2% target. The month-to-month increased by 0.6%.

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

The broader major indices closed sharply lower today led by the NASDAQ index which fell -1.56%. The S&P index fell -1.22%. The declines push the indices into the red for the trading week. The Dow industrial average fell -0.83%.

For the trading week,

• Dow industrial average closed up 0.12%
• S&P index fell -0.16%
• NASDAQ index fell -0.39%

The declines today were led by Adobe which tumbled -4.23% after the AI high flyer beat on earnings, but forward guidance disappointed. Nvidia – another AI stock – tumbled -3.69%, and Microsoft fell -2.52%. Other chip stocks including AMD (-4.82%), Intel (-2.04%), Taiwan Semiconductor Manufacturing company (-2.43%), and Broadcom (-2.29%) fell sharply.

Meta (-3.70%), Amazon, -2.98%, Home Depot (-2.50%) and McDonald’s (-2.31%) were big losers on the day.

Disney (+1.3%), American Express (+1.25%), and UnitedHealth (+0.63%) were the only Dow 30 stocks that gained today.

Auto workers went on strike today, and despite the strike, shares performed better than the market with GM and Stallantis shares up on the day. Ford fell modestly

• GM shares rose 0.83%
• Ford shares fell -0.04%
• Stallantis shares rose 2.12%

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

S&P is out with it expectations for the UAW strike and implications. They say

• Warns that if the UAW strike continues for over a week and expands, it could lead to significant reductions in earnings and liquidity in the US auto sector for 2023.
• Predicts a slowdown in U.S. auto sector momentum in the second half of 2023 and expects volumes to remain flat in 2024.
• Anticipates that a quick resolution to the UAW strike is unlikely.
• Expects automaker ratings to remain stable, accounting for industry volatility in their financial risk assessments.
• Believes the Detroit 3 automakers have a modest inventory cushion compared to the industry average.
• Believes that as of September 1, both GM and Ford had sufficient vehicle inventories to prevent any significant permanent earnings or market share loss.
• Notes that GM seems to be about two weeks short on SUV segment inventories compared to the industry average.
• As of September 1, believes Stellantis might have proactively overstocked some high-volume models.
• Suggests the UAW strike might temporarily boost new vehicle gross profits for dealers, but GPU is expected to decline to more normalized levels in the coming year.
• Warns that if the UAW strike lasts beyond 8 weeks, dealers might begin to run out of parts, impacting them negatively.
• States that a UAW strike will not significantly impact the majority of auto suppliers from a ratings perspective.

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

The price of WTI crude futures are settling at $90.77. That’s up $0.61 or 0.66%. The low for the day reach $89.22. The high extend up to $91.15.

For the week, the prices up around 4% on the week. This is the 3rd consecutive up week for crude oil.

Technically, the price is closing above its 100 week moving average at $85.91.

Looking at the hourly chart below, the price low today found early buyers against the 100 hour moving average (blue line in the chart below), and quickly reversed back toward the high for the day.

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

Headlines:

• 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.