GB CBI Distributive Trades -27 vs -43 prior

This article was written by Arno V Venter at www.forexlive.com.

• Libya’s Al Waha Company says it will start partial reduction in production
• WTI extends gains with news that Libya will be stopping all production and exports
• Earnings in focus this week again with Nvidia
• Germany received a tip-off about potential Russian sabotage act at a NATO site
• FX not playing ball with commodities and equity performance today
• Atlanta Fed GDPNow sitting at 2%
• Germany Aug Ifo business climate index 86.6 vs 86.0 expected
• Heads up that this week is month-end
• Weekly update on interest rates expectations
• Riksbank meeting minutes
• Markets hold to a view of >100 bp of cuts for the Fed by year-end
• What are the main events for today?
• Swiss Non-Farm Payrolls 5.499 vs 5.484M prior
• Conditions for sustained USD weakness not fully in place
• Japan leading indicator -2.1 vs -2.6 prior
• Equity and bond expectations divergence likely to be bullish for the USD
• India GDP seen at 6.9% in April to June vs 7.8% in previous quarter
• Most commodities are trading in the red apart from oil

Markets:

• JPY leads, NZD lags on the day
• European equities flat; S&P
  500 futures up 0.15%
• US 10-year yields up 2 bps
  to 3.81%
• Gold
  up 0.36% to $2,521
• WTI
  crude up 2.69% to $76.84
• Bitcoin down 0.48% to $63,953

It was a classic
quiet Monday session with little in terms of market moving data releases. The
only highlight was the German IFO reading which came out basically in line with
estimates.

The only major
news was the Libyan eastern-based government declaring the closing down of all oil
fields and halting production and exports as a force majeure announced in
response to the attempts to take over the central bank by the Tripoli-based
government.

In the
markets, there’s been very little movement with just crude oil getting the
attention following the Libyan news as the price shot 1.5% higher and counting.

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

Oil continues to extent on gains after Libya announced a force majeure on all facilities, terminals and oil fields.

Next major resistance on the chart is the 200DMA coming up around $77.76. It also has confluence with the 2 standard deviation implied volatility high for the day.

This article was written by Arno V Venter at www.forexlive.com.

Libya’s Al Waha Company says it will start partial reduction in production, „continued pressure“ will lead to complete halt – statement.

Oil continues to grind higher on the news with WTI testing close to $76.50.

This article was written by Arno V Venter at www.forexlive.com.

Libyan eastern-based government says all oil fields closing down, halting production and exports – statement.

• Force majeure announced in response to the attempts to takeover the central bank by the Tripoli-based governments.

This article was written by Arno V Venter at www.forexlive.com.

The poster child of the AI theme is reporting earnings this week, with options markets implying a close to 10% move for Ndivia on their earnings release this week.

Given the over 6% weighting in the S&P and close to 12% weighting in the Nasdaq it can really move the needle should earnings offer meaningful positive or negative surprises.

At this stage it feels like a lot of good news have been priced in, and arguably means that the size of beat and guidance needs to be solid to hold up to what is priced.

Another name to keep on the radar is Salesforce with a chunky weighting of close to 5% in the Dow.

This article was written by Arno V Venter at www.forexlive.com.

UPCOMING
EVENTS:

• Monday: PBoC MLF, German IFO, US Durable Goods Orders.
• Tuesday: US Consumer Confidence.
• Wednesday: Australia Monthly CPI, Nvidia Earnings.
• Thursday: US Q2 GDP 2nd Estimate, US Jobless
  Claims.
• Friday: Tokyo CPI, Japan Retail Sales, Eurozone Flash
  CPI and Unemployment Rate, Canada GDP, US PCE.

Tuesday

The US Consumer
Confidence is expected at 100.1 vs. 100.3 prior. The last report saw the present situation index, which is generally a
leading indicator for the unemployment rate, falling to a three-year
low.

Dana M. Peterson,
Chief Economist at The Conference Board said: “Confidence increased in July,
but not enough to break free of the narrow range that has prevailed over the
past two years. Compared to last month, consumers were somewhat less
pessimistic about the future.”

“Expectations for
future income improved slightly, but consumers remained generally negative
about business and employment conditions ahead. Meanwhile, consumers were a
bit less positive about current labour and business conditions.”

“Potentially,
smaller monthly job additions are weighing on consumers’ assessment of current
job availability: while still quite strong, consumers’ assessment of the
current labour market situation declined to its lowest level since March 2021”.

Wednesday

The Australian
Monthly CPI Y/Y is expected at 3.4% vs. 3.8% prior. The RBA continues to
maintain a hawkish stance, while the market keeps on expecting at least one
rate cut by the end of the year.

Thursday

The US Jobless
Claims continues to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
have been on a sustained rise showing that layoffs are not accelerating and
remain at low levels while hiring is more subdued.

This week Initial
Claims are expected at 234K vs. 232K prior, while Continuing Claims are seen at
1870K vs. 1863K prior.

Friday

The Tokyo Core CPI
Y/Y is expected at 2.2% vs. 2.2% prior. As a reminder, the economic indicators
the BoJ is focused on include wages, inflation, services prices and GDP gap.
The Tokyo CPI is seen as a leading indicator for National CPI, so it’s generally
more important for the market than the National figure.

Moreover, Governor
Ueda kept the door open for rate hikes as he said that the recent market moves
wouldn’t change their stance if the price outlook was to be achieved and added
that Japan’s short-term interest rate was still very low, so if the economy
were to be in good shape, BoJ would move rates up to levels deemed neutral to
the economy.

The Eurozone CPI
Y/Y is expected at 2.2% vs. 2.6% prior, while the Core CPI Y/Y is seen at 2.8%
vs. 2.9% prior. This report won’t change anything for the ECB as the central
bank is going to cut rates by 25 bps in September.

The US PCE Y/Y is
expected at 2.5% vs. 2.5% prior, while the M/M figure is seen at 0.2% vs. 0.1%
prior. The Core PCE Y/Y is expected at 2.7% vs. 2.6% prior, while the M/M
reading is seen at 0.2% vs. 0.2% prior. Forecasters can reliably estimate the
PCE once the CPI and PPI are out, so the market already knows what to expect.

This report won’t
change anything for the Fed as they will cut rates in September no matter what.
The Fed is now focused on the labour market and the next NFP report is going to
decide whether the FOMC will cut by 25 or 50 bps at the upcoming decision
on the 18th of September.

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

• Mon:
  UK Market Holiday (Bank Holiday), German Ifo (Aug)
• Tue:
  CBRT Minutes, Chinese Industrial Profit (Jul), German GfK Consumer
  Sentiment (Sep)
• Wed:
  Australian CPI (Jul), Nvidia (NVDA) Earnings (Q2)
• Thu:
  Spanish Flash CPI (Aug), German State CPIs (Aug), EZ Sentiment Survey
  (Aug), US GDP (2nd) and PCE (Q2)
• Fri:
  Japanese Tokyo CPI (Aug), French Prelim CPI (Aug), German Unemployment
  (Aug), EZ Flash CPI (Aug), Italian Flash CPI (Aug), US PCE (Jul), US
  University of Michigan Final (Aug)

PBoC Delayed MLF (Mon): PBoC announced last week
that it has delayed its MLF operation and will conduct it on August 26th.
Instead of the MLF, the PBoC injected CNY 577.7bln via 7-day reverse repos,
while it added that the reverse repo operation that day was meant to counteract
maturing MLF loans, tax payments and government bond issuances. „This
would be consistent with the policy direction to gradually fade MLF as a
guidance to market rates”, said the head of FX and Rates at Oversea-Chinese
Banking Corporation. In response to Reuters asking if the central bank would
shift the timings of MLF operation, the PBoC replied “Future arrangements would
be ‘subject to the actual operation time.’” It’s worth reminding ourselves that
the delayed MLF operation does come after a series of rate cuts in July, with
market watchers suggesting the sequence of the cuts showed a change in the
framework – shifting short-term rates to be the main market-guiding signal. For
reference, China’s benchmark Loan Prime Rates were kept unchanged, as widely expected,
with the 1-year LPR maintained at 3.35% and the 5-year LPR held at 3.85%.

Chinese Industrial Profits (Tue): There are
currently no expectations for July Chinese Industrial Profits, although the
data will be watched for a prognosis of the health of China’s manufacturing
sector. In June, Chinese industrial firms‘ profits increased by 3.6% Y/Y,
accelerating from a 0.7% rise in May. Despite the recovery from last year’s
weak performance, profits remain below 2022 levels and far from the record
highs of 2021, according to Bloomberg. NBS at the time suggested the recovery
was hindered by insufficient domestic demand and a challenging international
environment. Analysts at ING said the data “recently recovered to low
single-digit growth but could begin facing some pressures again amid recent
signs of a manufacturing pullback.”

Australian CPI (Wed): Weighted CPI Y/Y is
forecast to tick lower to 3.4% from 3.8%. Desks believe the introduction of
energy rebates by the Commonwealth, Queensland, and Western Australia
governments in July is anticipated to lower electricity bills, with Westpac
predicting a 32% drop in electricity prices for the month – and in turn a
Weighted CPI print of 2.9% – below the market forecast. The Desk says “When
combined with a -2.3%mth fall in auto fuel and flat food, this should see a
-0.6%mth decline in the July Monthly CPI Indicator with the annual pace
dropping sharply from 3.8%yr to 2.9%yr”. From an RBA perspective, the data will
be keenly watched given the recent hawkish tones from the central bank. As a
reminder, the most recent RBA Minutes from the August 5th-6th meeting stated
the board considered the case to raise rates and decided a steady outcome
better balanced the risks and added it is possible cash rate would have to stay
steady for an extended period. RBA Governor Bullock stuck to a hawkish tone at
the post-meeting press conference in which she noted that the board considered
a rate increase and that a cut is not on the near-term agenda, while she also
stated that they are ready to raise rates if needed and that the pricing of
cuts for the next six months does not align with the board.

Nvidia Earnings (Wed): The consensus expects
Nvidia to report EPS of 0.63 per share, on revenues of USD 28.35bln. The tech
giant is expected to guide Q3 EPS at 0.69 and Q3 revenue at 31.18bln. For the
full year, Nvidia is expected to guide EPS around 2.70, and revenue of USD
120.14bln. Analysts generally expect Nvidia’s upcoming earnings report to show
strong results due to sustained AI demand, however, there is a little caution
due to potential production delays. Oppenheimer anticipates strong Q2 results
and positive Q3 outlook, driven by datacentre growth. HSBC and Stifel predict
continued strength, despite concerns about potential delays in the Blackwell
series. Susquehanna expects robust results, but notes risks from possible
delays in the GB200. Wells Fargo is focused on long-term growth, especially
from Blackwell and software monetisation, while Barclays highlights
stronger-than-expected supply chain metrics and increased datacentre revenue
forecasts. According to Refinitiv’s data, analysts currently rate Nvidia’s
stock as a Buy, with an average price target of USD 137.41/shr.

Japanese Tokyo CPI (Fri): The release is
typically used as a preview for the mainland metrics released a couple of weeks
after. Core Tokyo CPI is seen remaining at 2.2%, whilst headline CPI is seen
cooling to 1.9% from 2.2% – primarily due to the government’s temporary energy
subsidy program. “However, service sector prices are likely to grow at a faster
pace than in the previous month due to strong wage growth”, according to ING.
The data comes in the context of BoJ normalisation. BoJ Governor Ueda said at
Friday’s parliamentary testimonies that economic indicators released after the
July rate hike, including Q2 GDP and wage data, confirmed the economy was
moving in line with BoJ’s outlook and therefore, the July decision was
appropriate. He added there is no change to the stance that they would adjust
the degree of monetary easing if the price outlook is likely to be achieved.

EZ Flash CPI (Fri): Expectations are for
headline HICP to have pulled back to 2.2% Y/Y in August from 2.6% in July, with
the super-core metric seen pulling back to 2.8% Y/Y from 2.9%. The prior
release saw an uptick in the headline rate to 2.6% Y/Y from 2.5%, with the
increase driven by an uptick in energy inflation. Elsewhere, the widely-watched
services component ticked lower to 4.0% Y/Y from 4.1%. This time around,
analysts at Investec “are pencilling a drop in the headline measure of
inflation to 2.3% Y/Y. This is related to energy given the 4.9% fall in oil
prices in the month and a positive base effect from utility prices”. Its
analysts look for services inflation to remain “sticky” and “do not expect to
see a sustained improvement in until wage growth eases more materially.” As a
reminder, regional releases ahead of the Eurozone-wide metric will give traders
insight into what to expect for Friday’s release. From a policy perspective, a
September rate cut is fully priced with greater interest over how the rate
cutting cycle will proceed thereafter with a total of 64bps of easing seen by
year-end which implies two 25bps rate cuts, and a 56% chance of another 25bps
reduction.

US PCE (Fri): The consensus looks for headline
PCE to rise +0.2% M/M in July (prev. +0.1%). Writing after the release of CPI
and PPI data, WSJ’s Nick Timiraos said forecasters who translate the CPI and
PPI into the PCE expect core prices rose 0.16% M/M in July – which would be
0.2% M/M rounded, matching the June metric. Timiraos added that this would hold
the 12-month rate steady at 2.7% Y/Y, the six-month annualised rate would fall
to 2.7% from 3.4% in June, and the three-month annualised rate would fall to 1.9%
from 2.3%. Capital Economics says the CPI and PPI data show a firm
disinflationary trend, and supports the case for the Fed to cut rates by 25bps
in September, despite a potential slight annual increase in core PCE inflation.
It said that while some categories, like rent and motor vehicle insurance,
showed higher prices, the data overall suggests that inflationary pressures are
moderating, but not enough to justify a larger cut. Analysts are generally of
the view that the Fed will firm its view after seeing the August jobs report
(due September 6th).

Australian Retail Sales (FRI): Retail Sales data
for July is seen ticking lower to 0.2% from 0.5%. The report will provide the
first official data on the impact of the “stage 3” tax cuts on consumer
spending introduced in July. Westpac’s Card Tracker suggests that consumers are
mostly saving their income gains, resulting in only a modest increase in
spending. Westpac however forecasts the print at 0.8% – above market consensus
– “On balance we expect retail sales to post a 0.8% gain in July, likely to be
viewed as a subdued result given the context [of tax relief]”, the desk says.

This article originally appeared on Newsquawk.

This article was written by Newsquawk Analysis at www.forexlive.com.

IMF chief economist Pierre-Olivier Gourinchas spoke in an interview with Reuters at the Jackson Hole annual economic symposium on Friday. Saud the BoJ can continue to raise rates gradually, a ‚data dependent‘ pace:

• inflation is higher than the Bank’s 2% target
• inflation expectations have started to move „maybe even a little bit above“ that target
• BOJ’s beginning to normalise monetary policy is „certainly something that we think is a good development for Japan“

Gourinchas also weighed in with his two cents on the market volatility:

• „I think the market overreacted,“
• „… we could see other episodes of market volatility“ due to rate cuts from many central banks while the BOJ begins to raise rates

—

I don’t know how much attention the Bank of Japan will give his opinions. I suspect not much.

He’s right about more volatility to come at least. With Federal Reserve Chair Powell confirming a September rate cut:

• Forexlive Americas FX news wrap: USD falls as Powell pleges „everything we can“ for jobs

And the BoJ hiking, plenty more to come.

This article was written by Eamonn Sheridan at www.forexlive.com.

• Powell at Jackson Hole: The time has come for policy to adjust
• BOE’s Bailey: Market events like two weeks ago will happen, test is whether more triggered
• Fed’s Goolsbee: We want to be careful about the employment side of the mandate
• Goolsbee: The size of Fed cuts isn’t important, it’s the path
• ECB’s Rehn: European growth outlook is looking somewhat weaker than the US
• Canada June retail sales –0.3% vs -0.3% expected
• US new home sales for July 0.739M vs 0.625M expected
• Fed’s Bostic estimates long-run Fed rate at 3%
• Fed’s Bostic: We want a calm, orderly return to normalization
• ECB sources: Broad support starting to form over Sept rate cut

Markets:

• NZD leads, USD lags
• WTI crude up $1.91 to $74.92
• US 10-year yields down 6.5 bps to 3.79%
• Gold up $28 to $2510
• S&P 500 up 1.1%

Powell’s Jackson Hole speech had plenty of hype and often that leads to a let-down but that certainly wasn’t the case this time. Most expected him to at least hint at a rate cut but he laid it out explicitly and then layered on a comment saying the Fed „will do everything we can to support a strong labor market.“

Also notable was what that speech didn’t include and that was a nod to moving gradually or anything along those lines. That means Powell wants to keep his options open around 50 bps either now or later.

In short, he managed to out-dove himself despite a high bar and the market reaction was strong. The US dollar fell hard across the board in a move that sustained itself throughout the day with few pullbacks.

There was some angst about Powell yesterday and that led to USD buying but those moves were wiped out in the initial round of USD moves followed by an extension later.

It was all orderly but I’m going to be carefully watching USD/JPY in Asia-Pac trading at the open. That pair fell nearly 200 pips and finished with the lowest close since January. There’s still 270 pips until the intraday squeeze low from August but those left in the carry trade could be feeling the pinch and there could be another rush to the exits.

Have a great weekend.

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