EUR/USD, USD/JPY, GBP/USD flows - no-vol summer, but for how long; BoJ hike talk continues
Low vol summer, extreme lows may be suggestive of more noise ahead, eventually
Further sources talk of BoJ mulling Sep and faster
UK byelection finishes with Reform winning locally, but losing nationally
Summer drift continues, if drift where the low FX and risk volatility is feeding into the summer meltup too for now, with retail sucked back into the equity market after the big tech selloff in July. Regional stocks continue to improve while the S&P is still sitting back at the fresh highs over the last few sessions. Whether this all proves a bit of a bull trap for moving out of holiday season is to be seen.
FX vol sits around the bottom limits of the long-term range so that also, in that contrary indicator fashion, is potentially suggestive of some scope to blow up at some point out of current compression.
On the news front, Reuters BoJ sources suggest that the BoJ is considering raising rates as soon as Sep and to pick up the pace of tightening from its previous twice a year pace. This largely echoes comments from Jiji earlier in the week and the market is pricing odds of a Sep hike now up to around 65-70%, from the 30-40%s not that long ago.
In the UK, Count Binface managed 26.7% of the vote against Nigel Farage in the byelection stunt that looks to have spectacularly backfired in terms of Reform's national polling. ‘Politics discount’ has very much been squeezed out of sterling after the slight flurry earlier in the summer, though the market is still waiting to see how fiscal policy shapes up in earnest once we come out of the summer recess. Sadly though, this does mean that Binface will not be cutting my taxes and raising yours, nationalising Adele, or building 'at least one' affordable home. Sterling largely unmoved.