Market Update – August 12

USDIndex lifted to 105 after dropping to a low of 104.50 after the early data, but is still heading for a weekly loss amid trimmed back expectations for the Fed’s tightening path. US Yields down, but the curve inverted further as the short end underperformed,  Yields in Australia and to a lesser extend New Zealand backed up today. US Stocks closed mixed, while in Asia, Stocks in Japan rallied in catch up trade on their return from yesterday’s holiday, but elsewhere the picture looked patchy overnight. The ASX lost -0.5% and Hang Seng and CSI 300 are up 0.37% and down -0.06% respectively, after a narrowly mixed close on Wall Street. European and US futures are posting modest gains though. Oil pushed up to the $94 handle after the IEA upgraded its demand outlook yesterday, Gold sank to $1790 and BTC steady.

Fed’s Daly who told Bloomberg yesterday, that there is an improvement in inflaiton numbers, but victory, repeating that her base case is for a half-percentage point hike at the next meeting.

UK GDP contracted -0.1% q/q in the second quarter of the year, in line with our forecast and a tad less bleak than Bloomberg consensus, which predicted a contraction of -0.2% q/q. The -0.6% m/m decline in the monthly GDP number for June was sobering though and backed the BoE’s bleak outlook for the economy, which seems to be heading for a recession amid the cost of living crisis, the fallout from Brexit and political turmoil in Westminister.

USDIndex dropped to a low of 104.50 after the early data, but bounced to 105.18 by the close. 4%
EquitiesUSA100 off -0.58%, additionally hurt by the run up in rates. The USA500 was -0.07% lower, and the USA30 was 0.08% firmer.
Yields 10-year rate closed 12 bps higher at 2.89%. The 30-year cheapened 14 bps to 3.165%. The 2-year was up 2 bps to 3.235%. The curve was less inverted at -35 bps versus -44 bps Wednesday.
Oil – $93.90, Brent at $99.22 per barrel, after the IEA upgraded its demand outlook yesterday.
Gold –has been capped and it saw a low of $1783.67, before backing up to now $1790.87, as Treasury yields nudged lower.
Bitcoin  struggling to break 25K resistance.
FX MarketsEURUSD down to 1.0300, USDJPY steady at 133.35 and Cable holds at 1.2170 floor.

Today – US Michigan Index.

Biggest FX Mover @ (06:30 GMT) NZDJPY (+0.70%) back to July’s highs at 86.00. MAs aligning higher, MACD lines extend higher, RSI 72.80 & rising, H1 ATR 0.167, Daily ATR 0.976. Key Resistance at 86.56.

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Andria Pichidi

Market Analyst

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