Global indices were up across the board without major economic data events to dent optimism. Shorter-end yields slid with the dollar basket also lower on the yen following BOJ comments.
Chart: GBPUSD
US Deputy Treasury Secretary Wally Adeyemo said the auto industry and workers were in a good position to reach a deal. Comments came after press reports that UAW would reduce its wage increase demands. Meanwhile, the Fed’s August consumers survey saw 1-year inflation expectations ticking up to 3.6% from 3.5% in the prior month. Gold continued to range but reached a top of $1930/oz before recoiling back to $1920/oz, with the weakening of the support at $1915/oz exposing $1905/oz.
UK Chancellor of the Exchequer Jeremy Hunt said that more measures to boost the economy would be announced soon, ahead of the Autumn Budget. BOE member Catherine Mann (hawk) insisted on the need to do “what’s necessary” to bring inflation down “sooner rather than later”. Press reported that BOE futures see an 80% chance of a quarter-point rate hike at the September BOE meeting. Cable left a 4-day losing streak behind and support at $1.2450. Resistance is expected at $1.2577 if $1.2550 gives way to bulls.
In a press interview, LDP senior official Hiroshige Seko underlined that the comments from BOJ Governor Kazuo Ueda on wage growth that saw the yen strengthen were meant to imply the BOJ will continue with easing. The remarks were seen as part of comments from Japanese officials “walking back” some of the implications from Ueda’s comments, underlying that the exit from the easing policy will happen after the 2% inflation target is achieved. USD/JPY had a volatile session but closed with the yen in the lead, down to 146.63 and further from resistance at 147.28.
In its summer economic forecast report, the European Commission cut its GDP forecast for the Euro Zone to 0.8% from 1.1% in the prior report, seeing Germany growing -0.4% this year, the only economy in the Area to have a contraction. It also cut its inflation outlook to 5.6% from 5.8% prior. EUR/USD advanced to $1.075 on Monday on a softer dollar, opening up $1.0795 unless bearish action brings the focus back to $1.07.
The government of New Zealand published its pre-election budget early Tuesday, which saw a rising deficit due to the slowing economy to NZD11.4B, below the NZD12.5B anticipated. The government also published a smaller-than-expected bond-buying program for the next four years, at NZD9.5B compared to NZD15B anticipated. After a spike to 0.5935 yesterday, the Kiwi started the session on bearish footing, trading near 0.59 and bringing 0.5887 in focus.