Europe Summary and Highlights 1 Sep
USD/JPY and EUR/USD sit at big figures, consolidating the Warsh adjustment
Bond yield highs remain in focus, along with risk impact
EZ HICP high headline as expected, cements ECB hike; details have nuances
Europe
Minor chop continues since the dollar was marked up post Warsh, dollar a touch firmer and EUR/USD pulling back on Monday’s minor corrective bounce. Sitting around big figures references with USD/JPY around 160 and EUR/USD 1.16~.
Indeed, latter seen having a lot of expiries at and clustering either side of 1.16 this week which might tend to keep things compressed into the key US payrolls data release unless some more impulsive incentives kick in prior, around bonds/risk, or geopolitics (latter seeing the first missile exchanges in more than a month of course).
On the bond front, yields continue to press the highs, with JGBs seeing 10yrs hit 3% for the first time in 3 decades and other majors also stretching their current highs. Eying risk sensitivity to that, S&P future current off around ½ %, Nasdaq off around 1%.
EZ HICP rises to 3.3% from 2.9%, in line with market expectations, and seen cementing the Sep ECB hike (virtually 100% priced in). Details nuanced - core slipped to 2.4% from 2.5%, while ex processed food and energy at 2.1% from 2.2% (mkt 2.3%). Interesting to note an ECB Blog today argue that energy has driven largely all of the current inflation upswing and therefore a measured policy response appropriate.
Asia Session
USD/JPY is staying below 160 on Tuesday as market participants quietly waits for the next cue. The market is looking for strong commitment from the BoJ to hike rates. JGB yields are frontrunning that decision with 2/10yr refreshing high and 30yr close to May high. USD/JPY is trading 0.09% higher at 159.88.
The fiasco between U.S. and Iran persists as both sides are playing hardball again. More disruption is expected and we are seeing oil price gaining more than half a USD/b. Major equity indexes are soft with precious metal also lower. AUD/USD is trading 0.03% higher at 0.7169. NZD/USD is trading 0.13% lower while USD/CAD also 0.08% higher. Else, EUR/USD down 0.08% and GBP/USD down 0.02%.