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CNY

Currencies Lose Momentum as Caution Sets In

The euro, pound, and yen are essentially flat against the dollar this morning as month end flows begin to dominate the foreign exchange landscape, with market participants generally inclined to cut leverage ahead of what could be an extremely dangerous September. Data releases continue to paint a mixed picture of fundamental developments in the US economy. Yesterday’s July durable goods report beat expectations on the headline level, but proved disappointing on closer examination. Overall orders climbed 9.9 percent from the prior month, but this was largely due to a jump in aircraft orders, which rose almost $23.4 billion after falling...

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Holding pattern

• Consolidation. Partial reversal in some markets. US equities slip back while yields & the USD tick up. AUD eased but still near the top of its range.• AU CPI. Monthly inflation due tomorrow. A lot of uncertainty due to electricity subsidies. A large drop in the annual headline rate could weigh on the AUD.• Fed pricing. Markets grappling with whether the US Fed will cut rates by 25bps or 50bps at upcoming meetings. History & the data points to 25bp steps. After the outsized moves last week it isn’t surprising to see that some markets cooled their jets a...

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The time has come

• Dovish Powell. US Fed Chair gave strong signals the start of the rate cutting cycle is approaching. Focus now on downside labour market risks.• Market jolt. Equities & commodities jumped, bond yields & the USD declined. AUD at the top of its 7-month range. EUR highest since mid-2023.• Event radar. Locally, July CPI (Weds), CAPEX (Thurs), & retail sales (Fri) are due. Offshore, Eurozone inflation & US PCE Deflator (Fri) are released. Markets ended last week on a positive note with the more dovish than anticipated message from US Fed Chair Powell boosting risk sentiment (see below). US equities...

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USD doldrums

• Mixed markets. Equities slip back, while bond yields & the USD lose ground. EUR above ~$1.11 for first time this year. AUD at ~1-month high.• Global events. JPY also stronger. BoJ research papers keep door open to more hikes. Canadian inflation slows & Sweden’s Riksbank cuts rates again.• US data. Annual US payrolls revisions due tonight. Downward revisions look likely. PMIs (Thurs) & Fed Chair Powell’s speech (Fri) the main events. Mixed, albeit modest moves, across asset markets overnight. After a stellar run equities paused for breath with the US S&P500 slipping back (-0.2%), its first fall in 9...

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Jackson Hole in focus

• US trends. US equities power ahead, while bond yields & the USD lost ground. AUD up at a multi-week high despite the slump in iron ore.• Fed speech. Fed Chair Powell speaks later this week. Will he push back on the still aggressive near-term rate cut expectations?• Event radar. In addition to the Jackson Hole speech the global PMIs (Thurs), Japan CPI (Fri) & NZ retail sales (Fri) are also due. It was a rather subdued end to a busy week on Friday with limited new economic information released to challenge the status quo. Equities continued to move higher...

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