Here’s a snapshot of things as a whole:

• Eurostoxx -1.6%
• Germany DAX -1.5%
• France CAC 40 -0.9%
• UK FTSE -0.6%
• S&P 500 futures -1.1%
• Nasdaq futures -1.8%
• Dow futures -0.8%
• Russell 2000 futures -2.2%

The selling is pretty much broad-based as seen above, so it’s not quite just limited to tech.

In FX, the dollar is slightly weaker across the board today but the changes are relatively light. EUR/USD is up 0.3% to 1.0820 with its 100-day moving average at 1.0792 still holding. Meanwhile, USD/JPY is down 0.3% to 148.90 as sellers continue to stay in control on the week.

All eyes are now fixated on the US jobs report later to see if that might change up the mood before the weekend.

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

Let’s get straight to it.

On paper, August is the worst month for AUD/USD and pretty much the aussie in general. Over the last 20 years, the pair has fallen in 16 out of the last 20 August months. It’s almost the polar opposite of what February typically is for AUD/USD. If you look at AUD/JPY, the trend is rather similar as well:

That might be a bit of an indication that August is typically one of the worst months for risk trades in general. In fact, it’s one of the worst months for major indices in Europe. For the DAX, August is the worst performing month seasonally while for the CAC 40, it is the second-worst (only June is worse).

Or if you want to tie things more closely to the yen currency, August is also the second-worst month for the Nikkei (only January is worse). And it is already off to a disastrous start to the month as seen here.

As for USD/JPY though, August has been a bit of a softer month historically. But in recent years, there is a bit of a different pattern emerging:

In the last four years, the pair had risen in June then fallen in July before coming back up in August. So far this year, the pair also climbed in June and fell during July trading. Will we see a bounce in August as such? Of course, things are quite different now with the BOJ having just hiked its policy rate and Japan having intervened in the market last month.

These are arguably the more interesting seasonal patterns for FX in August trading. But there are a couple of other ones to be mindful of in broader markets. Of note, August is usually the worst month for copper.

But I guess you can also tie that to being a poor month for risk in general over the years. And it’s definitely not a given as July has been a strong month for copper typically, but last month the metal fell by nearly 4%. Price is now trading inches away from its 200-week moving average at $4.01, so that will also be a key technical level to be mindful of.

And looking to the last 10 years, August also marks one of the best months for 10-year Treasuries i.e. yields falling. So, that’s also in part a tailwind associated with the yen currency. And we’re already getting to that early on with yields breaking below 4% following the Fed earlier this week.

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

• BOE will decide appropriate degree of restrictiveness at each meeting
• Not giving any view on the path of rates to come (when asked about a „one and done“)
• We will go from meeting to meeting, making judgement based on evidence
• Does not want to comment on market curve on rate cuts

It doesn’t look like he will want to pre-commit to anything nor does he rule out the notion that they may pause after cutting rates today. As things stand, traders are pricing in a ~55% probability of another rate cut in September. Pretty much another judgement call it would seem. The BOE will meet next on 19 September and there will be two CPI reports to watch before then (14 August and 18 September).

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

• Services price inflation and domestic inflation pressures remain elevated
• There might be a slight rise in services price inflation in August, before easing for the rest of the year
• Watching services prices very carefully
• Should not adjust our course with every data surprise that comes in
• There is still a question on whether persistent component of inflation can return to 2% sustainably
• Need to make sure policy is sufficiently restrictive to return inflation to 2% target
• Appropriate to adjust policy restrictiveness a little at today’s meeting

This is mainly a rehash of the statement. So, there isn’t really anything new as he continues to highlight that there are still risks to the inflation outlook. On to the Q&A now. GBP/USD is still down 0.5% on the day at 1.2785 but settling a little higher after the decision earlier.

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

That is to be expected as the bloc is set to continue with the current policy stance before unwinding some of the production cuts later in October. Carry on as you will.

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

US-based employers announced 25,885 job cuts in July, which is roughly a little over 9% higher compared to the same month a year ago.

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

• Prior 5.25%
• Bank rate vote 4-0-5 vs 4-0-5 expected (Pill, Mann, Haskel, Greene dissented to keep rates on hold)
• Decision was „finely balanced“
• Domestic inflationary persistence is expected to fade away over the next few years
• There is a risk that inflationary pressures from second-round effects will be more enduring in the medium-term
• Need to be careful not to cut rates too quickly or by too much
• Will ensure bank rate stays restrictive for sufficiently long to return inflation to 2% target sustainably
• Will decide on degree of policy restrictiveness at each meeting
• There is uncertainty about interaction between cutting bank rate and quantitative tightening
• Full statement

The rate cut itself can be argued to be the more dovish decision, but the details are less than convincing. The five policymakers who voted for a rate cut were Bailey, Breeden, Dhingra, Lombardelli, and Ramsden. But the footnote reads that they just found it „appropriate to reduce slightly the degree of policy restrictiveness“. I think there might be an emphasis on the word „slightly“ there.

Additionally, the BOE notes that some of the five members are of the view that „inflationary persistence had not yet conclusively dissipated, and there remained some upside risks to the outlook“.

Put together, that might allude to a pause in September unless inflation developments continue to improve in the weeks ahead.

As for the dissenters, the footnote mentions that they „preferred to maintain the current level of bank rate until there was stronger evidence that upside pressures to inflation would not materialise“. But just be mindful that this will be Haskel’s last meeting in attendance before stepping down from his post as BOE policymaker.

GBP/USD dipped initially on the decision to a low of 1.2751 but is holding around 1.2760 levels now, just down slightly from the decision. That said, the pound had made some slight moves in positioning for a dovish outcome earlier here.

Now, let’s see if Bailey will explicitly mention a one-and-done scenario or if he is going to keep September on the table later.

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

The JPY is the strongest and the AUD is the weakest as the North American session begins. The BOJ did hike rates to 0.25% as leaked yesterday. Meanwhile Australia’s trimmed mean CPI was weaker than expected helping to weaken the AUD. The Fed rate decision is later today as is earnings from Meta. After the close yesterday, Microsoft disappointed, but AMD did not. Nevertheless, despite MSFT shares being down -3% in premarket trading, soon after the release it was over twice that decline. AMD shares are up 8.64%.

The Bank of Japan (BOJ) raised its policy rate to 0.25% from 0.10% in its July 31, 2024, meeting, with dissent from Nakamura and Noguchi. The BOJ will taper bond purchases to ¥3 trillion by Q1 2026, reducing monthly bond buying by ¥400 billion each quarter, and will review this plan in June 2025. The BOJ noted gradual inflation increases and moderate economic recovery, indicating potential future rate hikes based on economic conditions.

BOJ Governor Kazuo Ueda stated that Japan’s economy is recovering moderately, emphasizing the importance of monitoring financial and FX markets and their impact on the economy and prices. He pointed out that there are upside risks to prices and judged it appropriate to adjust the degree of easing. Real interest rates remain significantly negative, supporting the economy, and the BOJ plans to taper JGB purchases predictably while ensuring stability.

Ueda indicated that private consumption remains solid despite the impact of inflation, with wage hikes becoming more widespread, which will continue to support private consumption. He does not believe that the rate hike will significantly harm the economy and mentioned no specific ceiling for the policy rate, implying that it could go beyond 0.50%. The BOJ will analyze the impact of previous rate hikes when considering additional increases and will closely watch economic indicators such as wages, inflation, service prices, and the GDP output gap.

He noted that it is hard to comment on the FX impact of a stronger yen on the economy and prices, but it is an important risk factor. Ueda also mentioned that the weak yen was not the primary reason for the rate hike, and the BOJ’s central price outlook was not significantly influenced by it. The major issue is determining where to stop raising rates when approaching the neutral rate, which Japan is still far below.

The core CPI out of Australia showed a 0.8% rise for the quarter which was lower than the 1.0% expected. That weakened the AUD further (it has been on a downward trajectory of course) and may keep the RBA from raising rates to tame inflation at the August meeting next week.

The FOMC rate decision is at 2 PM with the press conference at 2:30 PM with Chair Powell. WSJ Timiraos stressed that the first 3 paragraphs are key with the statement being voted on by policy makers. Here is his cheat sheet for your guide.

The Fed is expected to keep rates unchanged, but September is pretty much fully priced in by the market. What wordsmithing will the Fed chose IF they do intend to lay the pipe for a cut at the next meeting?

IN stock news as earnings progress this week, Microsoft, Starbucks, AMD and Pinterest reported after the close yesterday. What are their stocks doing today in pre-market trading?

• Microsoft, -3.6% (now)
• Starbucks up 3.59%
• AMD, +8.53%
• Pinterest, -10.63% after disappointing earnings and guidance.

Looking at other big cap stocks: Nvidia is up 6.55%, Amazon is down -0.19%, Google +0.70%, Apple +0.67%, Tesla up 1.1%. Morgan Stanley named Nvidia as one of it’s Top Picks. Nvidia earnings won’t be announced until mid-month.

A slew of earnings were reported this morning with Boeing yet to come. Below are the summary and whether they beat, met or missed expectations:

Altria Group Inc (MO)

• Adj. EPS: $1.31 (expected $1.30) – Beat
• Revenue (ex. excise taxes): $5.28 billion (expected $5.39 billion) – Miss

Garmin Ltd (GRMN)

• EPS: $1.56 (expected $1.40) – Beat
• Revenue: $1.51 billion (expected $1.42 billion) – Beat

Kraft Heinz Co (KHC)

• EPS: $0.78 (expected $0.74) – Beat
• Revenue: $6.48 billion (expected $6.55 billion) – Miss

Marriott International Inc (MAR)

• Adj. EPS: $2.50 (expected $2.47) – Beat
• Revenue: $6.44 billion (expected $6.48 billion) – Miss

Automatic Data Processing Inc (ADP)

• Adj. EPS: $2.09 (expected $2.06) – Beat
• Revenue: $4.77 billion (expected $4.74 billion) – Beat

T-Mobile US (TMUS)

• Adj. EPS: $2.49 (expected $2.28) – Beat
• Revenue: $19.77 billion (expected $19.55 billion) – Beat

Humana Inc (HUM)

• Adj. EPS: $6.96 (expected $5.85) – Beat
• Revenue: $29.54 billion (expected $28.51 billion) – Beat

GE Healthcare (GEHC)

• EPS: $1.00 (expected $0.98) – Beat
• Revenue: $4.8 billion (expected $4.87 billion) – Miss

DuPont (DD)

• EPS: $0.97 (expected $0.85) – Beat
• Revenue: $3.171 billion (expected $3.05 billion) – Beat
• Outlook: FY EPS view $3.70-3.80 (expected $3.63), FY Revenue view $12.4-12.5 billion (expected $12.26 billion)

After the bell today, Meta (Facebook), Qualcomm, Carvana, Lam Research, Western Digital. Tomorrow, Amazon, Apple, Intel, Coinbase and DraftKings highlight the releases.

On the economic calendar today:

USD: ADP Non-Farm Employment Change

• Estimate: 147K
• Previous: 150K

CAD: GDP m/m

• Estimate: 0.1%
• Previous: 0.3%

USD: Employment Cost Index q/q

• Estimate: 1.0%
• Previous: 1.2%

USD: Pending Home Sales m/m

• Estimate: 1.4%
• Previous: -2.1%

A snapshot of the other markets as the North American session begins shows:

• Crude oil is trading up up $2.61 or 3.49% at $77.34. At this time yesterday, the price was at $75.37
• Gold is trading up $10.07 or 0.43% at $2421 . At this time yesterday, the price was trading at $2388.29
• Silver is trading up $0.24 or 0.84% at $28.62. At this time yesterday, the price is trading at $27.79
• Bitcoin trading at $66,062. At this time yesterday, the price was trading at $66,658
• Ethereum is trading at $3318.90. At this time yesterday, the price was trading at $3338.60

In the premarket, the snapshot of the major indices is to the upside ahead of the FOMC rate decision later today

• Dow Industrial Average futures are implying a gain of 57 points . Yesterday, the Dow Industrial Average rose 203.40 points or 0.50% at 40743.344
• S&P futures are implying a gain of 53 points . Yesterday the S&P index closed lower five -27.10 points or -0.50% at 5436.45
• Nasdaq futures are implying a gain of 304 points . Yesterday the index closed lower by -222.78 points or -1.29% at 17147.42
• Yesterday, the Russell 2000 index rose 7.80 points or 0.35% at 2243.14

European stock indices are trading mixed.

• German DAX, +0.454%
• France CAC, +1.08%
• UK FTSE 100, +1.22%
• Spain’s Ibex, -0.17%
• Italy’s FTSE MIB, -0.10% (delayed 10 minutes).

Shares in the Asian Pacific markets closed higher:.

• Japan’s Nikkei 225, 1.49%
• China’s Shanghai Composite Index, +2.06%
• Hong Kong’s Hang Seng index, +2.01%
• Australia S&P/ASX index, +1.75%

Looking at the US debt market, yields are trading marginally lower:

• 2-year yield 4.356%, -0.3 basis points. At this time yesterday, the yield was at 4.389%
• 5-year yield 4.027%, -0.9 basis points. At this time yesterday, the yield was at 4.066%
• 10-year yield 4.133%, -0.7 basis points. At this time Friday, the yield was at 4.170%
• 30-year yield 4.390%, -0.9 basis points. At this time Friday, the yield was at 4.423%

Looking at the treasury yield curve, the spreads are little changed from yesterday

• The 2-10 year spread is at -22.4 basis points. At this time yesterday, the spread was at -21.9 basis points.
• The 2-30 year spread is at 3.4 basis points. At this time yesterday, the spread was +3.5 basis points.

In the European debt market, the benchmark 10-year yields are lower:

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

Headlines:

• BOJ raises policy rate to 0.25% in July monetary policy meeting
• BOJ governor Ueda: Weak yen was not necessarily the biggest reason for rate hike
• BOJ governor Ueda says does not have 0.50% policy rate in mind as a ceiling
• BOJ governor Ueda: Hard to tell when the next rate hike may be
• USD/JPY extends fall as downside break eyed
• USD/JPY Technical Analysis – The pair cracked through the key 152.00 handle
• Eurozone July preliminary CPI +2.6% vs +2.5% y/y expected
• Italy July preliminary CPI +1.3% vs +1.2% y/y expected
• France July preliminary CPI +2.3% vs +2.4% y/y expected
• Germany July unemployment change 18k vs 15k expected
• Germany June import price index +0.4% vs +0.1% m/m expected
• Switzerland July UBS investor sentiment 9.4 vs 17.5 prior
• Plenty for markets to look out for as July trading winds down

Markets:

• JPY leads, AUD lags on the day
• European equities higher; S&P 500 futures up 0.9%
• US 10-year yields down 0.5 bps to 4.135%
• Gold up 0.5% to $2,420.53
• WTI crude up 3.2% to $76.27
• Bitcoin down 0.1% to $66,095

The BOJ certainly took their time with their decision but it was no secret after the leak yesterday already. They moved to raise the policy rate by 15 bps to 0.25% while announcing a slow and gradual taper to their bond purchases.

The yen whipsawed on the initial decision, with USD/JPY jumping down to 151.60 before moving back up to touch 153.88. The 100-hour moving average at 153.67 held at the time, keeping price action around 153.00-30 mostly. That was until BOJ governor Ueda’s press conference, before the yen gained further in a push all the way down to 150.04 and is holding near the lows currently.

Besides that, the action in major currencies were not too eventful. EUR/USD is up 0.2% to 1.0830 levels but nothing outstanding. GBP/USD is flat at 1.2835 and USD/CHF down 0.3% to 0.8800 on the day.

The aussie is the laggard following a softer Q2 CPI report, with AUD/USD keeping lower by 0.5% near 0.6500 currently.

In the equities space, stocks are staying buoyed ahead of month-end with S&P 500 futures racing up to near 1% gains as tech shares look to bounce back strongly. European indices are also looking to wrap up the month on a positive note with French stocks leading the charge.

It’s now over to the dollar side of the equation and the Treasury market to respond to the US ADP employment data and the Fed later in the day. Yields are in a cycle of lower highs, lower lows so that is something to be mindful of as we look to August trading.

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

• Prior -2.2%
• Market index 201.2 vs 209.3 prior
• Purchase index 132.8 vs 134.8 prior
• Refinance index 570.7 vs 614.9 prior
• 30-year mortgage rate 6.82% vs 6.82% prior

The drop in the past week owes much to a decline in refinancing activity but purchases activity also fell slightly. It continues to suggest a more subdued mood in the housing market overall as mortgage applications are keeping more repressed. The market index is the lowest since the final week of May.

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