Today is jampacked with JOLTS job vacancies and the Conference Board consumer confidence in the US

KBC Market Research Desk KBC Bank

Markets

German Bunds outperformed US Treasuries at the calm start of what is going to be busy week. Yields in the country dipped between 2.9 (2-yr) and 5.3 bps (30-yr), continuing the recent yield correction. US yields added up to 1.6 bps at the front after trading lower for most of the day. Longer maturities finished up to 2.8 bps lower but were also well off intraday lows with the turnaround happening when US dealings were in full swing. Treasury announcing lower borrowing estimates for the running quarter than expected in April gave US Treasuries some last-minute support (see below). Stock markets struggled in Europe (-0.97% EuroStoxx50, wiping out all Friday gains) and, after opening higher (mostly tech) finished virtually unchanged in the US. Bund outperformance and stock underperformance gave the dollar an upper hand against most global peers, the euro in particular. EUR/USD dropped from 1.086 at the open to 1.082 into the close. The trade-weighted dollar index printed some decent gains though they were bigger earlier on the day. DXY rose from 104.31 to 104.56. JPY stabilized near recent highs at USD/JPY 154.02. Sterling’s large intraday swings ended up in the currency erasing much of end of last week’s losses against the euro. EUR/GBP fell from as high as 0.846 to 0.841. UK chancellor Reeves yesterday announced the results of the audit into UK public finances. She said the Labour government had inherited £21.9 bn of “unfunded and undisclosed” spending commitments. She then outlined a series of measures to address this, amounting to some £5.5bn in savings. That leaves a shortfall of more than £16bn that will need to be taken into account when Labour will release its first budget, scheduled for October 30.

Skipping a fairly uneventful Asian session, we dive right into the economic calendar of today. It is jampacked with JOLTS job vacancies and the Conference Board consumer confidence in the US. A series of GDP releases is due in the euro area with the European wide figure published today as well. France is typically one of the first major nations to report growth and already did so this morning. Q2 GDP expanded by 0.3%, topping the 0.2% estimate and coming on an upwardly revised 0.3% in Q1. France’s economy is now 1.1% larger than the same period last year. With Germany’s reading still due it’s too soon to call for upward risks to the European figure (expected at 0.2% q/q). But even if these would materialize, unless they are material, we don’t expect it to leave a major mark on the euro nor yields. There are also important inflation numbers due as well. The German and Spanish outcome may set the tone for the European number tomorrow. While we think that (front-end) European yields shouldn’t ease much more given what is priced in for the ECB (slightly below-neutral terminal rate), risks remain tilted towards a further easing in a daily perspective, especially if the technical support zones start cracking (eg. 2.6% in Germany’s 2-yr, 2.91% in swap). That makes EUR/USD’s downside vulnerable as well, more so if risk sentiment remains a sour one.

News and views

The US Treasury yesterday announced its borrowing estimates for the July-September and October-December 2024 quarters. During the former, Treasury expects to borrow $740 bln, assuming an end-of-September cash balance of $850 bln. The borrowing estimate is $106 billion lower than announced in April 2024, largely due to lower Fed bond redemptions and a higher beginning-of-quarter cash balance. In October-December, Treasury anticipates to borrow $565 bln, assuming an end-of-December cash balance of $700 billion. The agency will later today announce additional details on the borrowing plans, including the distribution across maturities.

The British Retail Consortium price index defied expectations for a further drop towards stagnation by coming in at 0.2% y/y for July. The release matched June’s and was nevertheless the lowest since end 2021. In addition, prices dropped on a monthly basis by 0.1% following a slightly bigger 0.2% decline in June. Falling prices were driven by the non-food category (-0.2% m/m) whereas food prices still rose (+0.1%). The latter are up 2.3% y/y, compared to - 0.9% for the non-food section.

Download The Full Sunrise Market Commentary

Author

KBC Market Research Desk

KBC Bank

KBC's Market Research Desk publishes a number of short-term reports.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.