Market Roundup
•U.S. inflation data softer than expected
•U.S. crude inventories up more than 5 million bbls
•Gasoline demand improves, boosting confidence
•US Jul Real Earnings (MoM) 0.5% ,-1.0% previous
•US Jul CPI Index, s.a 295.28, 295.33 previous
•US Jul CPI (MoM) 0.0%,0.2% forecast, 1.3% previous
•US Jul Core CPI (YoY) 5.9%,6.1% forecast, 5.9% previous
•US Jul CPI (YoY) 8.5%,8.7% forecast, 9.1% previous
•US Jul CPI Index, n.s.a. 296.28,296.67forecast, 296.31 previous
•US Jul Core CPI (MoM) 0.3%,0.5% forecast, 0.7% previous
•US Jun Wholesale Trade Sales (MoM) 1.8%, 0.9% forecast, 0.5% previous
•US Wholesale Inventories (MoM) 1.8%,1.9% forecast, 1.8% previous
•US Gasoline Inventories -4.978M,-0.633M forecast, 0.163M previous
•US Crude Oil Inventories 5.458M, 0.073M forecast, 4.467M previous
•US Jul Cleveland CPI (MoM) 0.7% previous
Looking Ahead – Economic data (GMT)
•01:00 Australia MI Inflation Expectations 6.3% previous
Looking Ahead - Events, Other Releases (GMT)
• No significant events
Currencies Summaries
EUR/USD: The euro rose on Wednesday as dollar after a lower-than-predicted U.S. inflation print for July dampened expectations for 75 basis-point rate hike from the Federal Reserve in September. The U.S. Consumer Price Index (CPI) was unchanged last month after advancing 1.3% in June. Economists polled by Reuters had forecast a 0.2% rise. The euro gained over 1% on the dollar after the news, with the euro hitting a five week high of $1.03465, as the dollar tumbled across the board. Immediate resistance can be seen at 1.0300(HigherBB), an upside break can trigger rise towards 1.0330(38.2%fib).On the downside, immediate support is seen at 1.0237(15DMA), a break below could take the pair towards 1.0185(38.2%fib).
GBP/USD: Sterling rose against the dollar after lower-than-expected US inflation for July dampened expectations for a 75 basis point US Federal Reserve rate hike in September. Traders reduced bets that the Fed will make a third straight 75 basis point rate hike in September after US consumer prices did not rise at all in July compared to June. Sterling jumped 1.4% higher against a weakening dollar to an eight-day high of $1.2250. It was last up 1.2% at $1.2217. Immediate resistance can be seen at 1.2258(38.2%fib), an upside break can trigger rise towards 1.2426(50%fib).On the downside, immediate support is seen at 1.2131(14DMA),a break below could take the pair towards 1.2022 (23.6%fib).
USD/CAD: The Canadian dollar jumped to its highest level in nearly one week against its broadly weaker U.S. counterpart on Wednesday as investors cheered data showing an easing of U.S. inflation pressures. Investors worry that an accelerated pace of central bank tightening could hurt global economic activity. Canada is a major exporter of commodities, including oil, so the US dollar tends to be sensitive to growth prospects. U.S. crude prices were little changed at $90.54 a barrel, while the Canadian dollar was trading 0.4% higher at 1.2833 to the greenback, or 77.92 U.S. cents. It touched its strongest since last Thursday at 1.2819.Immediate resistance can be seen at 1.2815 (50%fib), an upside break can trigger rise towards 1.2845 (14DMA).On the downside, immediate support is seen at 1.2757 (Daily low), a break below could take the pair towards 1.2718(38.2%fib).
USD/JPY: The dollar declined against yen on after data showed that inflation pressures moderated more than expected in July. U.S. consumer prices did not rise in July due to a sharp drop in the cost of gasoline, delivering the first notable sign of relief for Americans who have watched inflation climb over the past two years.The Consumer Price Index rose by an annual rate of 8.5% in July, while the core CPI, which excludes volatile food and energy costs, gained 5.9%. Fed funds futures traders are now pricing in only a 38% chance that the U.S. central bank will hike rates by 75 basis points when it meets in September, compared to 68% earlier. A 50 basis point increase is seen as a 62% probability. Strong resistance can be seen at 134.28(14DMA), an upside break can trigger rise towards 135.00(Psychological level).On the downside, immediate support is seen at 132.57(5DMA), a break below could take the pair towards 130.30 (Aug 22nd low).
EquitiesRecap
European stocks closed higher on Wednesday amid easing worries about aggressive monetary tightening by the Federal Reserve after data from the Labor Department showed consumer price inflation in the U.S. slowed more than expected in the month of July.
The UK's benchmark FTSE 100 closed up by 0.25 percent, Germany's Dax ended up by 1.23 percent, and France’s CAC finished the day up by 0.52 percent.
Wall Street surged on Wednesday, putting the Nasdaq more than 20% above its June low, after U.S. inflation slowed more than expected in July and raised hopes the Federal Reserve will become less aggressive on interest rates hikes.
Dow Jones closed up by 1.63 percent, S&P 500 ended up by 2.13 percent, Nasdaq finished the down up by 2.89 percent.
Treasuries Recap
U.S. Treasury yields plunged on Wednesday and markets priced in a smaller Federal Reserve rate hike for September after data showed that inflation pressures moderated more than expected in July.
Benchmark 10-year note yields fell as low as 2.67%, before bouncing back to 2.77%. Two-year note yields got as low as 3.08%, before rebounding to 3.15%.
The yield curve between two-year and 10-year notes was at 39 basis points after earlier reaching minus 53 basis points, the deepest inversion since 2000.
Commodities Recap
Gold reversed course to trade lower on Wednesday as hawkish remarks from U.S. Federal Reserve officials dampened hopes of a let-up in aggressive policy tightening after tame inflation data.
Spot gold was down 0.3% to $1,788.39 per ounce by 3:34 p.m. ET (1934 GMT). It had risen to its highest since July 5 after the consumer price index (CPI) data.
Oil prices rose on Wednesday, rebounding from losses early in the session, helped by encouraging figures on U.S. gasoline demand and as lower-than-expected U.S. inflation data drove investors into riskier assets.
Brent crude futures settled up $1.09, or 1.1%, to $97.40 a barrel, while U.S. West Texas Intermediate crude futures gained $1.43, or 1.6%, to $91.93.
