The USD holds steady, oil prices ease, equity markets are mixed and US yields ease as Investors remain cautious. Equity markets mixed after Tuesday's slump, the USD holds steady near August highs, and the CNY approaches a 16-year low vs USD. Investors remain cautious ahead of further clues for US interest rates from the FOMC minutes released today. China's economic woes continue to impact markets with falling home prices and news that Zhongrong Intl Trust Co., missed payments on dozens of investment products since July. Fed Kashkari warned that inflation was "still too high", New Zealand keeps its interest rate on hold, while the BoE is expected to hike in September on continuing UK inflation pressure and the Dutch economy enters recession as inflation bites. Today the FOMC Minutes, US Industrial Production, and US Building Permits will help provide intraday direction to currency markets.
In other news. The US asks Iran to stop selling drones to Russia. Argentina struggles to avoid economic collapse after shock primary win. Cargo ship leaves Ukrainian port despite Russian threat of attack. Intel, Tower terminate $5.4 billion deal over regulatory hurdles. Tesla cuts Model S & X prices by over 6% in China. Latvia sends the army to guard the border with Belarus as illegal crossing attempts mount. US gas prices at year high, tight supply weighs on motorists. Canada's Northwest Territories declares a state of emergency due to wildfires. In the US, Target cuts annual forecast as Americans hold back on non-essential spending.
In currency markets. GBP strengthens as UK inflation data supports the case for more rate hikes. Russian Rouble steadies near 97 vs USD after the Russian emergency rate hike. AUD tested a fresh 9-month low. JPY weakens through 145 vs USD entering the intervention range. CNY hits 9-month lows and is approaching 16-year lows as its economy continues to suffer. CNY slips 0.2%, While Asian currencies are flat on average vs USD. Trading currencies rebound with JPY & CHF are flat, while AUD & SEK are up 0.1%, ZAR firms 0.3%, and NZD, NOK & MXN gain 0.4% vs USD.
Oil prices little changed as China's ongoing economic concerns are offset by expectations of tighter supply in the US. CAD holds near recent lows as markets remain risk averse with the prospect of continuing high US interest rates and on increasing Chinese economic woes. Domestically Canadian inflation quickens to 3.3%, but core measures show progress. Canadian home sales fall for the first time in six months after BoC hikes. PM Trudeau urged to change taxes, adopt 'industrial strategy' for rental housing. Alberta will never comply with the Federal clean power grid plan, premier vows. The US FOMC minutes will be the primary driver for markets today, but if we see a print outside expectations in CAD Housing Starts or Wholesale Sales it may have an impact on the Loonie.
EURCAD remains under pressure, down 1.6% month-to-date as increasing economic pressures on China continue to weaken commodity-based currencies.
EUR holds above 1.0900 after EU data and markets consolidate ahead of the FOMC minutes. Euro has managed to hold above 1.0900 amid mixed eurozone GDP data, while Eurozone employment beat expectations, but was the previous y/yQ2 and Eurozone GDP held steady at 0.6%. Eurozone Industrial product came in better than expected -1.2% vs expectations of -4.2% and beating the previous of -2.5%. Markets are sidelined heading into the US Housing Starts & Building Permits and the key FOMC minutes, which will help drive intraday direction to markets.
GBPEUR strengthens regaining early August losses after UK inflation data leaves the door open for more BoE interest rate hikes.
GBP retests 1.2750 after UK inflation report opens the door for more BoE interest rate hikes. The UK annual core inflation held steady at 6.9% in July month over month, but dropped significantly from 7.9% year over year. London rents jumped 5.5% in July, the largest annual rise since 2006. Markets are pricing in another 25bps rate hike in September and continue to speculate the BoE raising the policy rate by a total of 75bps by February 2024 after the latest jobs & inflation data. The anticipation of further BoE rate hikes should continue to provide the pound underlying support vs USD and should help the pound extends gains vs EUR into Q4/23. Today all eyes will be on the FOMC minutes for guidance on future US interest rates.
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