The USD steadies, oil prices edge higher, equity markets are mixed, and US yields rise on a shift in risk sentiment. Currency markets steady after Tuesday's volatility, global equities are set for their worst month so far in 2023, and European bonds fall after the latest EU data suggested inflation may not yet be fully on the retreat in the Eurozone. The USD has steadied after Tuesday's unexpectedly soft jobs and consumer confidence reading raised expectations that the Fed may be nearing the end of its tightening cycle. In commodities oil prices are up for a fifth day, equalling their best winning streak since March, and Gold steadied after rising on softer US data. Key events in focus today, German CPI, US ADP Employment Change, and US GDP will help provide intraday direction to currency markets.
In other news. Military leaders seize power in oil-rich Gabon. Ukraine launches its biggest drone attack yet inside Russian territory. Sticky Spanish & German inflation lift investor bets on ECB rate rise-FT. China says it is open for Business, sidesteps US 'uninvestable' comment-Reuters. German July import prices post the sharpest decrease since 1987. Florida Gulf Coast braces for major hurricane as Idalia nears landfall. China's largest property developer Country Garden's cash flow in focus as troubled firm set to report $7.5 bln loss. Blood thinners, diabetes meds among first 10 drugs for US price negotiations.
In currency markets. Chinese Yuan weakens ahead of key US & German data. AUD & NZD weaken & domestic bonds strengthen after surprisingly low reading on monthly inflation. EU & USD steady heading into key inflation data releases. Russian Rouble weakens again after exporters completed their rouble purchases to pay their monthly corporate taxes. CNY slipped 0.15%, while Asian currencies dropped 0.2% on average vs. USD. Trading currencies come under pressure with ZAR falling 0.6%, NOK, JPY, AUD & NZD weakening 0.3%, and SEK & CHF slipping 0.15%, while MXN strengthens 0.3% vs USD.
Oil prices rise on US stockpile drawdown and supply concerns as the hurricane in the Gulf of Mexico keeps investors on edge. CAD steadies after strengthening on Tuesday after softer-than-expected US data which raised the prospect that the Fed may pause in September. The loonie appears sidelined in early trading ahead of the key US ADP & GDP data releases, which will provide direction to currency markets today. Domestically investors will need to wait until Friday's GDP report to gauge the impact of the labor disputes and wildfires on the economy.
EURCAD edges higher as domestic EU inflation levels remain high surprising investors, and increasing the prospect of a further ECB rate hike in September.
EUR stalls below 1.0900 ahead of German inflation and US data releases. A flurry of data out of the EU has put markets on edge ahead of the German inflation report which is expected to ease slightly from 6.5% in July to 6.2% in August. Earlier we saw Spanish inflation print at 2.4% in August, higher than July's 2.1%. Markets saw EU Consumer confidence remain low, while both Economic sentiment, industrial confidence, and services sentiment all weakened below expectations. The higher inflation levels in Spain & Germany increased investor expectations to 60% that the ECB will hike at its September meeting. Today the German inflation report and US data will drive currency markets.
GBPEUR holds steady ahead of key US data releases today. In August the currency pair is flat, while YTD the pound remains up near 3% vs. the Euro.
GBP steadies near 1.2650 ahead of key US data releases. The pound holds on to Tuesday's gains after softer-than-expected US data releases which raised the prospect that the Fed may pause at its September meeting. Domestically data showed that British consumers borrowed less than expected in July in response to higher interest rates, while a gauge of the housing market was forecast to hit an 11-year low in 2023. Markets continue to expect the BoE to hike domestic interest rates in September by 25bps and could possibly hike another 25bps beyond September in 2023. Today US & German data will help provide direction to the pound intraday.
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