The AUD is the strongest and the CHF is the weakest as the North American session begins. Having said that, the major currencies are also scrunched together. Low to high trading ranges are relatively narrow with the EURUSD only having a 18 pips trading range, the USDCAD only 20 pips and the GBPUSD only 29 pips. Those are well below the 22 day averages (about a month of trading) at 59 pips, 52 pips and 77 pips the averages for those three pairs respectively. The other ranges are also limited suggesting there may be "room to roam".
The day in the US session does have a number of economic releases with the ECB rate decision set to kick things off at 8:15 AM ET. THe ECB is expected to cut the refinancing rate to 3.65% from 4.25%.. It cut that rate in June by 25 basis points from 4.5% to 4.25%. The Deposit Rate is expected to be cutr from 3.75% to 3.50%. In June it cut 25 basis points from 4.0%.
Guidance and Statement:
- Assessment: The statement will likely acknowledge that incoming information supports the ECB’s previous inflation outlook but highlights weaker growth.
- New Forecasts: Expected to show lower growth projections, a slight increase in near-term core inflation, and an unchanged medium-term outlook. Inflation is anticipated to approach 2% by the end of 2025.
- Domestic Price Pressures: Expected to be flagged, particularly in relation to high services price inflation.
Forward Guidance:
- Approach: The ECB is likely to maintain its data-dependent, meeting-by-meeting approach to policy adjustments.
- Risks: There may be a slight dovish tilt given the weakening growth outlook and internal discussions about whether this necessitates faster
For your guide, the:
ECB Refinancing Rate:
- The refinancing rate, also known as the Main Refinancing Operations (MRO) Rate, is the interest rate at which banks can borrow money from the ECB for a period of one week.
- It serves as the benchmark rate for lending in the Eurozone and influences other interest rates, including those for loans and mortgages.
- When the ECB adjusts the refinancing rate, it directly affects the cost of borrowing for banks and, consequently, the overall money supply in the economy.
ECB Deposit Rate:
- The deposit rate is the interest rate that the ECB pays to banks on their overnight deposits.
- This rate can be negative, which means banks are charged for keeping excess reserves with the central bank. A negative deposit rate encourages banks to lend more to businesses and consumers instead of parking their money at the ECB.
- The deposit rate is a key tool for controlling short-term interest rates and has been used extensively during periods of low inflation or economic stagnation.
ECBs Lagarde will conduct her press conference starting at 8:45 AM ET.
At 8:30 AM ET, the US PPI will be released with the expectations showing:
- PPI Final demand MoM 0.2% est. vs 0.0% last month
- PPI Final demand YoY 1.8% est. vs 2.2% last month
- PPI ex food and energy MoM 0.2% est. vs 0.0% last month
- PPI ex food and energy YoY 2.5% est vs 2.4% last month
- PPI Ex food, energy and trade YoY was 3.3% last month and rose 0.3% last month.
Also released today, the weekly initial jobless claims will also be released with the expectations:
- Initial jobless claims 230K vs 227K last week
- Continuing jobless claims 1.850M est vs 1.838M last week.
Canada building permits for July will also be released with expectations of 7.1% versus unstinting .9% last month.
At 1 PM ET, the US treasury will complete their coupon options with the sale of 30 year bonds. Both the three and 10 year note auctions were met with strong international demand pushing the yield lower vs the WI level at the time of the auction. The Bid to cover was higher than average.
A snapshot of the other markets as the North American session begins shows:
- Crude oil is trading up $1.01 at $68.30. At this time yesterday, the price was at $67.43
- Gold is trading up $6.64 or 0.26% at $2517.84. At this time yesterday, the price was $2523.80
- Silver is trading up up $0.10 or 0.35% at $28.75. At this time yesterday, the price is at $28.84
- Bitcoin is trading up $684 at $58,026. At this time yesterday, the price was at $56,801
- Ethereum is trading up $0.80 at $2348.70. At this time yesterday, the price was at $2328.90
In the premarket, the snapshot of the major indices are modestly higher after gains yesterday
- Dow Industrial Average futures are implying a gain of 52.12 points. Yesterday, the index rose 124.75 points or 0.31% at 40,861.71
- S&P futures are implying a gain of 7.12 points. Yesterday, the index rose 58.61 points or 1.07% at 5854.13.
- Nasdaq futures are implying a a gain of 12.45 points. Yesterday, the index rose 369.85 points or 2.17% at 17395.53
Yesterday, the small-cap Russell 2000 was higher by 6.411 points or 0.31% CAC 2103.84
European stock indices are trading modestly higher:
- German DAX, +1.12%
- France CAC, +0.76%
- UK FTSE 100, +0.77%
- Spain's Ibex, +1.09%
- Italy's FTSE MIB, +1.02% (delayed 10 minutes).
Shares in the Asian Pacific markets closed modestly higher:
- Japan's Nikkei 225, +3.41%
- China's Shanghai Composite Index, -0.17%
- Hong Kong's Hang Seng index, +0.77%
- Australia S&P/ASX index, +1.10%
Looking at the US debt market, yields are little changed:
- 2-year yield 3.66%, +1.4 basis points. At the same Friday, the yield was at 3.581%
- 5-year yield 3.457%, +1.0 basis points.. At this time Friday, the yield was at 3.400%
- 10-year yield 3.664%, +1.2 basis points. At this time Friday, the yield is at 3.618%
- 30-year yield 3.982%, +1.9 basis points. At this time Friday, the yield is at 3.932%
Looking at the treasury yield curve,
- The 2-10 year spread is +0.4 basis points. At this time yesterday, the yield spread was +3.7 basis points.
- The 2-30 year spread is was 32.0 basis points. At this time yesterday, the yield spread was +35.6 basis points.
In the European debt market, the 10 year yields are mostly higher:
