From Marc Chandler at Bannockburn Global Forex:
Overview: With Japanese markets closed for Mountain Day and a quiet summer Monday in Europe, activity in the foreign exchange market is subdued. It may continue in North America today, ahead of tomorrow’s CPI. Most of the G10 currencies are in narrow ranges and +/- 0.2% against the US dollar. Emerging market currencies are mostly in narrow, consolidative ranges.
Equity markets are mixed. The large bourses in the Asia Pacific region were mostly higher. Notable exceptions included the index of mainland companies that trade in Hong Kong, South Korea's Kospi and Singapore's Strait Times. Europe's Stoxx 600 is straddling unchanged levels in late European morning turnover, while US index futures are slightly firmer. Benchmark 10-year yields are a little softer, but the 10-year yield is off four basis points after the rising five basis points before the weekend to cap a four-day, 10 bp advance. The 10-year US Treasury yield is off around 2.5 bp to slightly below 4.26%. It also rose in the last four sessions. The White House is clarifying the confusion at the end of last week, and gold bars from Switzerland will not be subject to the tariff and classified as financial assets rather than goods. In the spot market, gold is off a little more than 1%. It has gained in six of the past seven sessions (~$122) and flirted with $3400 in the second half of last week. It is now a little below $3360. September WTI has steadied after falling to nearly $62.75 at the end of last week, its lowest level since the first part of June. Still, it has not traded above last week's settlement (~$63.90).
USD: Broadly said, the US dollar is trading heavier this month after the July rally and US interest rates are at the lower end of a three-month range. The Dollar Index's downside momentum stalled at the end of last week, slightly below 98.00, but above the (61.8%) retracement of last month's rally (~97.85). The economic diary is light today but tomorrow sees the July CPI. The median forecast in Bloomberg's survey expects the third consecutive monthly increases in the headline and core rates. The pendulum has swung hard, and now the Fed funds futures are discounting two cuts and about a 40% chance of a third in the last three FOMC meetings of the year. While following the intrigue and recognizing that Powell is entitled to complete his term as governor even after his chair role expires, it may not be impactful on central bank actions yet (though it could).Meanwhile, the investors are digesting the implications of a reports that Nvidia and AMD will pay 15% of their chip revenue earned in China to the federal government. It looks like an export tax, which the constitution explicitly forbids. Meanwhile, the three-day bench trial begins today in which California is suing the president over the federalization of the National Guard earlier this year. The use of military forces to enforce domestic laws is very conditional and Governor Newsom is challenging whether those conditions were met....
....MUCH MORE
