• US August core PCE +0.1% vs +0.2% expected
• Canada GDP for July 0.2% versus 0.1% expected
• US Advanced goods trade balance for August $-94.26 billion vs. -100.60B estimate
• US September UMich final consumer sentiment 70.1 vs 69.3 expected
• US wholesale inventories advanced for August 0.2% versus 0.3%
• Baker Hughes US oil rig count 484 vs 488 prior
• Musalem: Fed should cut rates gradually
• China urges local companies to stay away from Nvidia AI chips – report
• Timiraos on why lower rates don’t necessarily mean lower rates
• Atlanta Fed GDPNow Q3 forecast +3.1% vs +2.9% prior
• China cuts borrowing cost of standing lending facility by 20 bps
• Incoming Japan PM Ishiba: Japan will deploy fiscal stimulus if needed
• Israel strikes Hezbollah HQ and targets its leader
• Iran supreme leader holds emergency meeting of security council – report

Markets:

• Gold down $19 to $2650
• US 10-year yields down 3.6 bps to 3.75%
• WTI crude oil up 75-cents to $68.41
• S&P 500 down 7 points to 5738
• JPY leads, CAD lags

It’s tough to separate what was driven by quarter-end flows and what was driven by fundamentals. There was certainly some US dollar selling after Friday’s PCE report and the delivery of the China rate cut. However that 40-pip move was erased later. Some of that may have been due to Middle East worries but the conflict hasn’t been much of a market mover lately and if that was the driver you would expect more gains in gold and oil.

One move that was clearly fundamental was the choice of a new PM in Japan as the choice of Ishiba was met with a hawkish response leading to a huge rally in the yen and a 6% dive in Nikkei futures. Clearly the market was leaning towards the dovish Takaichi, particularly after the first round of votes.

USD/JPY was crunched on the news and continued to fall in US trading and is on track to close at the lows of the day/week at 142.11. The pair got some help from fixed income as the recent selling reversed by 2-6 bps in a front-end led flattener pulled down by the PCE report as well.

AUD and NZD are continuing to outperform on China optimism and we will note that Chinese markets are open Monday then closed for the rest of next week. We could get more stimulus announcements before then, and the market could also be pricing that in, so silence could be a downside risks. But spare a moment for the AUD/USD chart, as it looks to be breaking above a series of tops.

It was a lively week, have a great weekend. Next week we get another edition of non-farm payrolls.

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