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A subdued session on Wall St. saw the Dow Jones close +.6%, the S&P 500 +.1%, and the Nasdaq -.2%. U.S. 10-year yields traded 3bps higher to 3.87%, while crude oil rose 1.9% to $75.95 a barrel. The AUD/USD traded in a .6781/.6824 range before settling at .6795/00 ahead of the Asian session.
The greenback held onto to most of its gains over Germany’s EU harmonized CPI readings which showed a rise of 2.0% y/y in August, down from 2.6% in July and short of 2.2% forecasts. AUD/USD traded 10pts off fresh 0.6824 highs while NZD/USD fell back to 0.6270. EUR/USD traded 1.1090, GBP/USD 1.3180, and USD/JPY 144.60.
Q2 US GDP was revised higher with annualized q/q raised from 2.8% to 3.0% and personal consumption measures raised from 2.3% to 2.9%. In the same Q2 revision, the core PCE index was lowered 0.1% to 2.8% q/q while July wholesale inventories data and weekly jobs data matched estimates.
US yields rallied 0.5% across the curve following the stronger revisions and USD/JPY jumped around 80pts to 145.49 highs. The antipodeans drifted lower with the local unit falling to lows of 0.6781 while GBP/USD set new lows at 1.3146. US equities futures were positioned stronger – the S&P and Nasdaq minis +0.3% – ahead of the market open.
US Pending Home Sales for July fell by 5.5% MoM and 4.6% YoY, well short of expectations of +0.2% and -2.0% respectively. No reaction to the data though the greenback was marginally firmer heading into the London rate set with EUR/USD falling to new lows of 1.10555 while USD/JPY moved up to 145.55 highs.
Day Ahead
A busy day ahead beginning in Japan, where the unemployment rate will be released this morning. It is likely to have remained broadly steady in July at 2.5%, in the middle of the tight range it’s been in since late 2022. However, there are upside risks to this print, given the softening of job offers and openings in recent months.
In Australia, retail sales for July are due and markets believe we may start to see some support from the stage 3 tax cuts that were implemented, although a material pick-up is unlikely as many workers would not have started to receive the tax cuts until part-way through the month and consumer confidence remained soft in July.
In the Eurozone, core CPI will be released and is expected to show continued strong monthly growth, suggesting the year-ended rate may remain at 2.9%. Strength in wage growth has seen core inflation pick-up this year, with the 6-month annualised rate running at 3.5%. Eurozone unemployment rate has likely remained steady at 6.5% in July. While the PMI employment index weakened in the month and industrial capacity utilisation has continued to decline, reported labour shortages remain elevated.
In Canada, 2Q real GDP will be released, which will provide insight into the resilience of Canadian activity and could influence monetary policy expectations. GDP data for May exceeded market expectations, led by a strong goods sector. The consensus is for a reading of +1.7%. This is modestly higher than the 1.5% forecast by the BoC in the July MPR.
U.S. Core PCE index for July comes out. Following July’s CPI reading, markets expect a tamer reading for PCE. Should the data meet these expectations, it would mark the fourth consecutive month of sustained disinflation, providing further support for a September rate cut.
U.S. real personal spending for July is likely to indicate a rise for the month, given the strength of retail sales for July. It will provide an insight into the state of consumer and could help shape expectations for 3Q growth.
AUD/USD traded in a 0.6781/.6824 range overnight with the key levels remaining unchanged. Offering interest is expected to emerge ahead of 0.6870, while demand rests in the 0.6700/20 region.
Mid-market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6797 |
| AUD/NZD | 1.0852 |
| AUD/JPY | 98.50 |
| AUD/CNH | 4.8172 |
| AUD/EUR | 0.6133 |
| AUD/GBP | 0.5162 |
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