Thursday, August 10, 2023

Capital Markets: "The Greenback is Softer Ahead of CPI but Key Chart Points Remain Intact"

 From Marc Chandler at Bannockburn Global Forex:

Overview: The deluge of Treasury supply is nearly over for this week. On tap today are 4- and 8-week T-bills and $23 bln 30-year bonds to finish the quarterly refunding. The sales will come after the July CPI print that is expected to see the first year-over-year increase since last June. The market is going into the report with about a 15% chance of a Fed hike next month discounted. Meanwhile, September crude oil extended its recover from $80 seen on Tuesday to a new 12-month high near $85 before steadying. Amid strike fears, Europe's natural gas benchmark soared by more than 27% yesterday but is about 5.3% lower today. For its part, gold has stabilized after falling to four-week lows yesterday near $1914. It is pushing above $1920 in the European mornings. 

The dollar is broadly softer against the G10 currencies, but the Japanese yen, which is practically flat. The Swiss franc and euro are leading the move. However, notable chart levels have not been taken out and the intraday momentum indicators caution against chasing the dollar lower in early North American turnover. Most emerging market currencies are firmer. As widely expected, the Reserve Bank of India left rates steady, and the central bank of Mexico is expected to do the same later today. Equity markets are mostly higher. In the Asia Pacific, Taiwan, South Korea, and India were notable exceptions. Europe's Stoxx 600 is extended yesterday's gains and is up around 0.4%. US index futures are also trading higher. European benchmark 10-year yields are mostly 1-3 bp higher. Core-peripheral spreads are narrower. The US 10-year yield is hovering near 4%....