Russell Shor

The Federal Open Market Committee minutes for the July meeting were released yesterday and indicate that officials are still concerned about inflation. The minutes read that “most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.”

A big Chinese trust company, Zhongrong International Trust Co., is causing concerns because they have not been making payments on their investments lately. This company is typically involved in real estate and has been having trouble with payments on many of their investment products. This, along with home prices going down, is making people worried that the ongoing property crisis in China is making the economy's slow growth even worse.

UK headline CPI came in at 6.8% y/y, which was lower than the previous print of 7.9% y/y. However, core CPI is 6.9% y/y, the same as the prior month. Inflation is down from current cycle highs but is still far above the Bank of England’s (BoE) target of 2%.

Real yields have an effect on the USDOLLAR, Gold and Risk Indexes.

The UK’s average earnings index 3m/y (including bonuses) printed at 8.2%. This is higher than the previous 7.2% and higher than the forecast of 7.3%. In fact, regular pay grew by 7.8%, which is the highest rate since records began in 2001. This suggests another rate hike by the BoE in September is a distinct possibility.

China unexpectedly cut the medium-term lending facility (MLF) by 15bps to 2.5%. This is the biggest cut since 2020. This action is to provide support to an economy that is currently grappling with renewed challenges stemming from a deteriorating property market and sluggish consumer expenditure.

USDJPY has hit a new high for 2023, trading near 145.15. Market participants are now looking for potential Japanese government intervention to support the yen. The dollar has been bolstered by higher US yields and concerns over the Chinese property market.

Some weakness is evident in the weekly gold chart. A lower peak has charted. If a lower trough follows, the yellow metal will be in a defined downtrend on a weekly basis. The RSI has dipped below 50, which does suggest that there is an underlying bearish momentum. The longer it maintains under 50, the more pressure will be applied to the gold price.

FXCM’s USDOLLAR has risen over the last four weeks, since reaching an intermediate low on 14 July of 12,626. This recent appreciation has breached the 12,934 level, which was the last lower peak. I.e., the latest higher peak (HP) has effectively ended USDOLLAR’s downtrend. An uptrend is yet to start; however, the dollar has started the week on a solid footing. Moreover, the weekly RSI has popped above 50 (blue…

The recent inflation data for July in the US, which was released yesterday, matched expectations quite closely. This has reassured the markets that there are no immediate setbacks in the process of reducing inflation. The core inflation rate decreased slightly from 4.8% to 4.7%, while the headline rate increased from 3.0% to 3.2%. This increase was due to a smaller base effect compared to previous months, although it was still…

EURUSD will largely be influenced by today’s US CPI release. However, beyond that, European inflation remains sticky. The ECB still has a battle on its hands in its efforts to implement price stability. To this end, the EURUSD technically remains supported.