• Monetary policy is now on a good trajectory
• Inflation is much less worrisome than when ECB first started cutting rates in June
• „I am not per se against lowering rates, I only object when the timing does not look right“
• Headline inflation expected to rise temporarily in the coming months due to base effects
• October might not be the right time given limited amount of additional data

The full piece can be found here (may be gated). Anyway, this is as much of an endorsement as you’ll get to yesterday’s decision coming from an ECB hawk. It also reaffirms expectations of another pause by the ECB next month before going again in December.

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

Crude oil is finally
finding some footing this week as the dip-buyers might be looking forward to
the Fed’s easing cycle. As a reminder, the positioning in crude oil is at a
record 13 years low and the sentiment is very bearish.

These factors can generally
offer great contrarian opportunities. The main reason which could drive oil
prices higher is the imminent Fed’s easing into a resilient economy. Lower
rates generally lead to an increase in the manufacturing activity and therefore
increased demand for crude oil.

Moreover, the recent debate
between Trump and Harris might have also decreased the risk premium of higher
supply as Harris chances of winning the election according to betting markets
increased. This is just a marginal thing, but it could give the buyers a bit
more confidence.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil recently broke through the 67.68 low and extended the drop
into the 65.31 level before reversing. The target should now be the resistance
around the 71.67 level.

That’s where we can expect
the sellers to step in with a defined risk above the resistance to position for
a drop into the 64 support zone. The buyers, on the other hand, will want to
see the price breaking higher to increase the bullish bets into the major trendline.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price recently broke above the minor downward trendline that was defining the bearish momentum.
The buyers started to pile in more aggressively and with the break above the
most recent lower high at 69.05 level, the short-term trend should have
switched to an uptrend.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action and the break above the 69.05 level
yesterday. We got a bit of a consolidation around the level, but the bullish
momentum seems to be increasing.

We now have a minor upward
trendline defining the bullish momentum and we can expect the buyers to keep
leaning on it. The sellers, on the other hand, will want to see the price
breaking below the trendline and the 69 handle to position for a drop back into
the lows. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the University of Michigan Consumer Sentiment
report which is expected to print at 68.0 vs. 67.9 last month.

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

This will include steep tariff hikes on Chinese EVs, solar cells, semiconductors, and steel among other strategic goods. More specifically, it will be a 100% duty on Chinese EVs, 50% on solar cells, and 25% on steel, aluminum and key minerals. All of which will be going into effect on 27 September.

As for a 50% duty on Chinese semiconductors, that will be due to start in 2025.

Besides that, there will also be increases in tariffs on Chinese medical face masks and surgical gloves to 50% next year and then to 100% in 2026. That compares with the initial plan for an immediate 25% tariff. But the ones mentioned above are the heavy hitters.

Well, it looks like this is Biden’s parting gift before he steps down. And the ball is now over to China’s court is seeing how they will respond before potentially dealing with more of this if Trump does get elected come November.

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

The AUD is the strongest and the CHF is the weakest as the North American session begins. Having said that, the major currencies are also scrunched together. Low to high trading ranges are relatively narrow with the EURUSD only having a 18 pips trading range, the USDCAD only 20 pips and the GBPUSD only 29 pips. Those are well below the 22 day averages (about a month of trading) at 59 pips, 52 pips and 77 pips the averages for those three pairs respectively. The other ranges are also limited suggesting there may be „room to roam“.

The day in the US session does have a number of economic releases with the ECB rate decision set to kick things off at 8:15 AM ET. THe ECB is expected to cut the refinancing rate to 3.65% from 4.25%.. It cut that rate in June by 25 basis points from 4.5% to 4.25%. The Deposit Rate is expected to be cutr from 3.75% to 3.50%. In June it cut 25 basis points from 4.0%.

Guidance and Statement:

• Assessment: The statement will likely acknowledge that incoming information supports the ECB’s previous inflation outlook but highlights weaker growth.
• New Forecasts: Expected to show lower growth projections, a slight increase in near-term core inflation, and an unchanged medium-term outlook. Inflation is anticipated to approach 2% by the end of 2025.
• Domestic Price Pressures: Expected to be flagged, particularly in relation to high services price inflation.

Forward Guidance:

• Approach: The ECB is likely to maintain its data-dependent, meeting-by-meeting approach to policy adjustments.
• Risks: There may be a slight dovish tilt given the weakening growth outlook and internal discussions about whether this necessitates faster

For your guide, the:

ECB Refinancing Rate:

• The refinancing rate, also known as the Main Refinancing Operations (MRO) Rate, is the interest rate at which banks can borrow money from the ECB for a period of one week.
• It serves as the benchmark rate for lending in the Eurozone and influences other interest rates, including those for loans and mortgages.
• When the ECB adjusts the refinancing rate, it directly affects the cost of borrowing for banks and, consequently, the overall money supply in the economy.

ECB Deposit Rate:

• The deposit rate is the interest rate that the ECB pays to banks on their overnight deposits.
• This rate can be negative, which means banks are charged for keeping excess reserves with the central bank. A negative deposit rate encourages banks to lend more to businesses and consumers instead of parking their money at the ECB.
• The deposit rate is a key tool for controlling short-term interest rates and has been used extensively during periods of low inflation or economic stagnation.

ECBs Lagarde will conduct her press conference starting at 8:45 AM ET.

At 8:30 AM ET, the US PPI will be released with the expectations showing:

• PPI Final demand MoM 0.2% est. vs 0.0% last month
• PPI Final demand YoY 1.8% est. vs 2.2% last month
• PPI ex food and energy MoM 0.2% est. vs 0.0% last month
• PPI ex food and energy YoY 2.5% est vs 2.4% last month
• PPI Ex food, energy and trade YoY was 3.3% last month and rose 0.3% last month.

Also released today, the weekly initial jobless claims will also be released with the expectations:

• Initial jobless claims 230K vs 227K last week
• Continuing jobless claims 1.850M est vs 1.838M last week.

Canada building permits for July will also be released with expectations of 7.1% versus unstinting .9% last month.

At 1 PM ET, the US treasury will complete their coupon options with the sale of 30 year bonds. Both the three and 10 year note auctions were met with strong international demand pushing the yield lower vs the WI level at the time of the auction. The Bid to cover was higher than average.

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

• Crude oil is trading up $1.01 at $68.30. At this time yesterday, the price was at $67.43
• Gold is trading up $6.64 or 0.26% at $2517.84. At this time yesterday, the price was $2523.80

• Silver is trading up up $0.10 or 0.35% at $28.75. At this time yesterday, the price is at $28.84
• Bitcoin is trading up $684 at $58,026. At this time yesterday, the price was at $56,801
• Ethereum is trading up $0.80 at $2348.70. At this time yesterday, the price was at $2328.90

In the premarket, the snapshot of the major indices are modestly higher after gains yesterday

• Dow Industrial Average futures are implying a gain of 52.12 points. Yesterday, the index rose 124.75 points or 0.31% at 40,861.71
• S&P futures are implying a gain of 7.12 points. Yesterday, the index rose 58.61 points or 1.07% at 5854.13.
• Nasdaq futures are implying a a gain of 12.45 points. Yesterday, the index rose 369.85 points or 2.17% at 17395.53

Yesterday, the small-cap Russell 2000 was higher by 6.411 points or 0.31% CAC 2103.84

European stock indices are trading modestly higher:

• German DAX, +1.12%
• France CAC, +0.76%
• UK FTSE 100, +0.77%
• Spain’s Ibex, +1.09%
• Italy’s FTSE MIB, +1.02% (delayed 10 minutes).

Shares in the Asian Pacific markets closed modestly higher:

• Japan’s Nikkei 225, +3.41%
• China’s Shanghai Composite Index, -0.17%
• Hong Kong’s Hang Seng index, +0.77%
• Australia S&P/ASX index, +1.10%

Looking at the US debt market, yields are little changed:

• 2-year yield 3.66%, +1.4 basis points. At the same Friday, the yield was at 3.581%
• 5-year yield 3.457%, +1.0 basis points.. At this time Friday, the yield was at 3.400%
• 10-year yield 3.664%, +1.2 basis points. At this time Friday, the yield is at 3.618%
• 30-year yield 3.982%, +1.9 basis points. At this time Friday, the yield is at 3.932%

Looking at the treasury yield curve,

• The 2-10 year spread is +0.4 basis points. At this time yesterday, the yield spread was +3.7 basis points.
• The 2-30 year spread is was 32.0 basis points. At this time yesterday, the yield spread was +35.6 basis points.

In the European debt market, the 10 year yields are mostly higher:

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

• Euro remains boxed in ahead of the ECB later
• Gold Technical Analysis – Can’t get out of this range
• Weekly update on interest rate expectations
• BOJ’s Tamura says pace of rate hikes is likely to be slow
• BOJ’s Tamura: Cannot say whether we could raise rates by year-end
• Spain August final CPI +2.3% vs +2.2% y/y prelim
• China reportedly to cut interest rates on $5 trillion mortgages as soon as this month
• US housing costs rose last year but rent burden was unchanged – Census

Markets:

• AUD leads, CHF lags on the day
• European equities higher; S&P 500 futures up 0.1%
• US 10-year yields up 1.7 bps to 3.670%
• Gold up 0.2% to $2,516.57
• WTI crude up 1.7% to $68.45
• Bitcoin up 1.0% to $58,057

It was a quieter session as markets are lacking any real follow through after the US CPI report yesterday.

The inflation numbers pretty much affirm a 25 bps rate cut by the Fed next week and that’s keeping things in check so far on the week.

The dollar remains steady on the day, keeping little changed against the rest of the major currencies bloc. USD/JPY did work its way up to clip 143.00 briefly but is now back down to near flat levels around 142.40-50.

Besides that, the euro remains caged in with large option expiries in EUR/USD not allowing much breathing room until we get to the ECB later.

Even then, the 25 bps rate cut that will come from the ECB is already well telegraphed. So, there should not be any major price movements involving euro assets unless Lagarde steps wrongly.

In the equities space, we are seeing a calmer mood as well with US futures mildly higher. European indices are playing a little bit of catch up to Wall Street gains overnight. As for the bond market, things are calmer today as the bid in bonds is subsiding a fair bit. 2-year Treasury yields are now back up to 3.66%, backing off after testing its 2023 lows near 3.55% yesterday.

All eyes now are on the ECB and more US data to come on the day. The latter will feature the weekly initial jobless claims and PPI data. So, that will keep markets interested going into North America trading later.

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

Yesterday, we got the US CPI report and, although as expected it didn’t
have the same large impact as it used to, the core m/m figure surprised to the
upside.

The data triggered a
repricing in interest rates expectations with the market now seeing just a 13%
probability of a 50 bps cut at the upcoming FOMC meeting and less easing
further out the curve.

That weighed on the market
initially but as soon as the European session came to an end, we saw an
incredible reversal that pushed the price above the US NFP high of last Friday.

Right now, it looks like
the Fed is going to cut rates into a resilient economy, which is generally a
positive driver for the stock market but keep an eye on the growth and labour
market data as the market has become very sensitive to soft figures on that
front.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 yesterday rallied above the post NFP high which could
be a signal of further upside in the next weeks. The price is now back inside
the old range between the 5560 support
and 5665 resistance.

We can expect the buyers to
start targeting the resistance as long as the price stays above the support.
The sellers, on the other hand, will want to see the price falling back below
the range to position for new lows.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the price getting inside the old range. We are now seeing a
bit of a consolidation after yesterday’s one way move and today’s data might
either push the price further to the upside or we could see a pullback into the
5506 level.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the rally paused just above the 5560 level. If the price were to fall
below the level, we can expect the sellers to pile in to target a pullback into
the 5506 level. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the latest US Jobless Claims figures and the US PPI data.
Tomorrow, we conclude the week with the University of Michigan Consumer
Sentiment report.

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

In FX, the changes are light overall with dollar pairs keeping in relatively narrow ranges thus far today. The euro is in focus amid the ECB later but there shouldn’t be any real surprises from the decision itself. EUR/USD is trapped today in a 17 pips range and understandably so. The pair has very large option expiries in play as highlighted here earlier.

The rest of the major currencies bloc is also not up to much. USD/JPY briefly clipped 143.00 earlier in the session but is now up just 0.2% to 142.66 on the day. Besides that, the changes elsewhere are leaving a lot to be desired.

This comes as the overall market mood is steadier with the bid in bonds earlier this week subsiding. US futures are up slightly still while 10-year Treasury yields are also up 2.5 bps to 3.677% currently.

Besides the ECB, there will be some US data releases to work with later in the day as well. The weekly initial jobless claims and PPI data are ones to watch as well in US trading.

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

The IEA kept their forecasts for global oil demand broadly unchanged, seen at 900k bpd this year and 950k bpd for next year. That said, these numbers are way more pessimistic than other forecasters. That especially when you compare to OPEC, as seen here, even with their latest adjustments lower.

In keeping with their forecast, IEA warns that oil demand growth is „slowing sharply“ and it owes much to China’s economic growth slowing down. In their report, they highlighted how Chinese demand contracted for a fourth straight month and that Beijing’s oil imports have fallen to the lowest in almost two years.

As such, that will continue to be a downside risk for oil prices looking into the year ahead.

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

• Yields fall reverberates to broader markets to start the day
• USD/JPY Technical Analysis – Expectations for a 50 bps cut remain alive
• What is the distribution of forecasts for the US CPI?
• BOJ’s Nakagawa: Hard to comment on timing of next rate hike
• Fed to cut rates by 25 bps at each of the remaining three policy meetings this year – poll
• UK July monthly GDP 0.0% vs +0.2% m/m expected
• US MBA mortgage applications w.e. 6 September +1.4% vs +1.6% prior

Markets:

• JPY leads, USD lag on the day
• European equities a touch higher; S&P 500 futures down 0.1%
• US 10-year yields down 2.6 bps to 3.618%
• Gold up 0.3% to $2,522.42
• WTI crude up 2.6% to $67.49
• Bitcoin down 1.4% to $56,770

The most interesting part of the session was during the handover from Asia to Europe. That came as bond yields dipped and cast a bid on the Japanese yen in FX. USD/JPY in particular fell through to test 141.00 before touching a low of 140.70 during the day. The pair then caught a bounce back after, trading back up to 141.70 now but still down by 0.5%.

As yields fell, it put some light pressure on equities as well. S&P 500 futures fell as much as 0.6% before recovering most of that to be down just 0.1% now.

Focusing back on the bond market, 2-year Treasury yields flirted with a break to its lowest level in over two years. Yields were down by as much as 6 bps to 3.55% at one point, before keeping modestly lower now at 3.58%. 10-year yields on the other hand fell further to 3.61% and is keeping thereabouts.

With Treasury yields falling, the dollar is the laggard on the day as such. EUR/USD is up 0.3% to 1.1050 while USD/CHF fell to 0.8422 initially before rebounding back a little to 0.8460 now. Meanwhile, AUD/USD is also seen up 0.3% to 0.6670 on the day.

In other markets, gold is also starting to eye a further breakout as it hovers near the topside of its recent range. The precious metal is up 0.3% to $2,522 now, with buyers on the edge of their seats in wanting to chase a breakout.

That will be another area to watch out for as we turn the focus and attention to the US CPI report later.

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

• Prior +1.6%
• Market index 233.7 vs 230.5 prior
• Purchase index 138.6 vs 136.1 prior
• Refinance index 757.8 vs 751.4 prior
• 30-year mortgage rate 6.29% vs 6.43% prior

The average rate of the most popular US home loan dips further to its lowest since February last year. That comes amid a further drop in rates overall and that is helping mortgage activity catch a bounce. Both purchases and refinancing activities also picked up in the past week as such.

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