Sunset Market Commentary

The top US official for the Indo-Pacific region, Kurt Campbell, said that US President will tomorrow announce a trilateral agreement with Japan and South Korea to boost deterrence against North Korea and China. The deal includes a leader-level hotline, annual military exercises an annual summit and the creation of a mechanism to share intelligence. The “Camp David princimples” will be presented together with Japanese PM Kishida and South Korean President Yoon Suk Yeol.

US Manufacturing Accelerates

The US manufacturing sector is showing impressive expansion. The latest data from the Philadelphia Fed Manufacturing Business Outlook Index jumped from -13.5 to +12.0 in August, against forecasts of -9.8. This is the first time since August last year that the index has been in positive territory, and even with such a significant jump, it reinforces the positive signals from the Fed’s publications the day before.

US Inflation Data Sent Bond Yields Higher

US July CPI came out slightly below expectations with headline at 0.17% m/m (consensus 0.2%) and core at 0.16% m/m (consensus 0.2%). The modest downside surprise was driven by sharper-than-expected deflation in core goods prices (-0.33% m/m; June -0.05%), while our preferred measure for underlying inflation, core services ex. shelter and health care, accelerated after a very low June print (0.45% m/m; June 0.13%).

Slight Weakening of Crypto

Bitcoin volatility remains well below average and lower than most equities. There remains a delicate balance of range-bound moves with slightly higher downside risks as BTCUSD falls further behind its 50-day average. Medium-term speculators are likely waiting for the end of the consolidation to enter the activity in case of a move out of the recent range. The movement could become one-sided, with a break above $30.1K or below $28.9K.

British Pound Edges Higher after GDP Surprise

The week wrapped up on a high note in the UK, as the economy grew by 0.2% q/q in the second quarter. The gain was indeed modest, but it beat the consensus estimate of zero growth and the first quarter reading of 0.1%. The struggling UK economy thus managed to elude stagnation. Another good piece of news was that June GDP climbed 0.5% m/m, above the estimate of 0.2% and rebounding from the May reading of -0.1%. This is the highest monthly growth rate since October 2022.

New Zealand Dollar Poised to Break Below Key 0.60 Level

The New Zealand dollar has extended its slide for a fourth straight day. In the European session, NZD/USD is trading at 0.6005, down 0.26%. New Zealand

Japanese Yen Knocking on the 145 Door

The Japanese yen is trading quietly on Friday. In the European session, USD/JPY is trading at 144.82, up 0.07%. It has been an awful week for the yen, which is down about 2% against the US dollar. The yen fell as low as 144.89 today, and it looks like the yen will breach the 145 line for the first time since June.

Week Ahead – Fed Minutes, US Retail Sales and UK CPIs the Highlights of a Packed Week

The dollar pulled back after the miss in the US inflation data, but traders may have another opportunity to adjust their dollar positions as next week’s agenda includes the minutes from the latest Fed meeting and the retail sales for July. The pound will also enter the limelight as the UK CPIs could confirm whether investors were correct to slash their hike bets following the latest BoE gathering. Other releases include the RBNZ decision, where no action is expected, and Canada’s CPIs.

Dollar Turns to US Retail Sales and FOMC Minutes

With the US inflation report out of the way, dollar traders will turn their focus on the next edition of retail sales on Tuesday and the minutes of the latest FOMC meeting on Wednesday. Overall, it is becoming clear that the US economy is superior to its competitors at this stage, something that might be increasingly reflected in the FX arena moving forward.  

UK Growth Surprises in June, Cooling Pound Sell-off

According to a data set released on Friday, the UK economy performed better than expected across a wide range of indicators in June. GDP rose by 0.2% in the second quarter and 0.4% in the same quarter a year earlier. Expectations had been for growth of less than 0.2 percentage points.