Russell Shor

Gold has a robust inverse relationship to the 10-year real yield. The current correlation coefficient on the daily timeframe is -90%. Yesterday, the real yield declined by 6.57%, which saw the yellow metal respond and appreciate on the day.

With just a week left of the month, the NAS100 August candlestick (blue arrow) shows interesting price action. Initially, the month was bearish, with bears taking the index down to the month low of 14,555. However, the bears lost control at this level with the bulls taking over. The bulls have pushed price back up to the 15,350 levels and remain in control. We caution that the monthly candle is…

Constrained economic activity in the Euro Area is negatively impacting the EURUSD and influencing ECB policy. As such, the currency pair is sensitive to economic releases. Whilst the central bank has inflation foremost on its mind, the level of Euro Area slowdown cannot be ignored. Flash PMIs that were released today continue to indicate a challenging environment, implying contraction in both the manufacturing and services sectors.

The 10-year real yield and dollar were showing signs of moderation earlier today. However, both instruments’ trend-following indicators have now crossed up.

Microsoft presented a fresh proposal regarding the acquisition of Activision Blizzard. This move comes as a response to the initial proposition being turned down by regulatory authorities in the United Kingdom. The new deal includes a series of compromises and accommodations.

The 2-year yield serves as a good general proxy for monetary policy direction. The top chart shows the German 2-year yield, representing European monetary policy, and the chart underneath is the US 2-year yield. Since mid-July, the German 2-year has been trending down and the US 2-year has been trending up.

The 10-year real yield, adjusted for inflation, continues to climb. It is trading close to 2% at 1.96%. The last time real yields were at these levels was back in June 2009. This post-inflation yield will be appealing to a significant number of investors, adding increased rivalry for stocks, particularly stocks with elevated valuations. The daily candles in Chart 1 show that the 10-year real yield has charted a higher…

The Peoples Bank of China has stepped up efforts to defend the renminbi. The Chinese currency has been declining off the back of poor economic data and woes in its property sector. This includes a weakening in exports and fragile consumer confidence.

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%.