Headlines:
- Eurozone August preliminary CPI +5.3% vs +5.1% y/y expected
- France August preliminary CPI +4.8% vs +4.6% y/y expected
- US August Challenger layoffs 75.15k vs 23.70k prior
- Fed's Bostic: Monetary policy is appropriately restrictive
- ECB's Schnabel: We cannot predict where the peak rate is going to be
- ECB's Holzmann: August inflation data a conundrum for the ECB
- BOE's Pill: No room for complacency on inflation
- BOJ's Nakamura: Monetary policy does not target FX
- ECB: Members concurred there was ample evidence of strong policy transmission
- Chinese exporters look to intricate workaround to retain dollar earnings
- China's major state-owned banks reportedly seen selling dollars in onshore spot FX market
- Japan PM Kishida says will aim to raise average minimum wage to ¥1,500 by mid-2030s
- Germany July retail sales -0.8% vs +0.3% m/m expected
- Germany August unemployment change 18k vs 10k expected
- France Q2 final GDP +0.5% vs +0.5% q/q prelim
- Eurozone July unemployment rate 6.4% vs 6.4% expected
Markets:
- JPY leads, EUR lags on the day
- European equities higher; S&P 500 futures up 0.3%
- US 10-year yields down 2.2 bps to 4.096%
- Gold up 0.1% to $1,944.28
- WTI crude up 0.9% to $82.37
- Bitcoin up 0.3% to $27,350
There was plenty of action to digest in European trading today but when all is said and done, the euro is sitting lower as ECB rate hike bets were pared during the session.
It all started off with French inflation data, which came in hotter than expected, but ECB executive board member Schnabel's indecisive remarks did not help with trader confidence ahead of September. Odds of a 25 bps rate hike swung up to ~60% before falling to around ~48% after.
And then came along the Eurozone inflation data, which showed core inflation meeting estimates and reflecting a drop compared to July. That was enough for traders to take down the euro and bets for a rate hike, which are now trimmed to ~28% on the day.
EUR/USD was hovering around 1.0920 in the handover from Asia but is now trading near the lows for the day, down 0.5% to 1.0860 levels. The drop also comes alongside a rejection at the 100-day moving average of 1.0924 coincidentally.
As EUR/USD fell over, it helped to keep the dollar more bid as well. GBP/USD also took a fall from 1.2710 to 1.2665 while USD/CHF rose from 0.8785 to 0.8815 currently.
The Japanese yen is keeping slightly firmer amid lower bond yields, which are pinned down after a rise in US layoffs in August. That also helped to put a slight bid in stocks, with S&P 500 futures now up 0.2% after having been flat all day.
It's now over to US data again to see what that has in store for broader market sentiment later.