Forex

• Global markets remained in a "wait-and-see" mode today as investors anticipate a speech by Fed Chair Kevin Warsh at the Jackson Hole symposium tomorrow. • Recent economic indicators included a wider-than-expected US trade deficit for July, weekly jobless claims holding steady at 203k, and a slight increase in German consumer confidence. • Despite these data releases, interest rate markets have not adjusted their current positioning, viewing the upcoming Fed event as the primary driver of volatility.

• Stock markets surged yesterday, led by a significant jump in AI bellwether Nvidia, which rose more than 8%. • The Nasdaq outperformed other indices with a gain of nearly 1.6%, while the S&P 500 rose 0.7% and the DJI increased 0.2%. • The S&P 500 is now positioned less than 3% away from its all-time highs established in May.

• The Bureau of Economic Analysis is scheduled to release the personal consumption expenditures (PCE) price index report on Wednesday, August 26. • This report provides critical data on inflation, specifically through the Core PCE, which is the Federal Reserve's preferred metric for guiding monetary policy. • The release is a pivotal event for investors as it will likely influence the Federal Reserve's upcoming decisions regarding interest rate adjustments.

• The US released economic data for July focusing on the Personal Consumption Expenditures (PCE) deflators. • As the Federal Reserve's preferred gauge for inflation, the PCE is closely monitored despite being less timely than Consumer Price Index (CPI) indicators. • Current data suggests that inflationary pressures stemming from the conflict in Iran have not yet manifested in the PCE figures.

• Brent crude oil prices have declined for three consecutive days, dropping to approximately $86.7 per barrel, the lowest level seen in two weeks. • The downward trend began on Monday following details released by USTS Bessent regarding "Operation Economic Outcast." • This shift is significant as it signals a U.S. strategic preference for applying economic pressure over military re-escalation.

• US Treasury Secretary Bessent declined to announce secondary sanctions against Iran's trading partners and financial institutions during a recent press conference. • While Bessent unveiled new sanctions targeting specific individuals, entities, and vessels, he issued a final warning instead of the broader measures expected. • The decision falls significantly short of the "economic D-Day" that analysts and markets had anticipated prior to the announcement.

• Global markets began the trading week with a calm, "wait-and-see" approach as investors anticipate several high-risk events scheduled for later this week. • US Treasury yields saw slight declines, dropping between 1.5 basis points for the 2-year note and 4.2 basis points for the 30-year bond. • The 30-year yield currently holds at 5.23%, remaining close to its recent multi-year peak of 5.33%.

• European companies reported a strong 18% increase in earnings per share during the second quarter, marking a significant recovery after flat growth in 2024–2025. • Major financial institutions Goldman Sachs and JPMorgan are bullish on the STOXX Europe 600, forecasting a rally to 670–680, roughly 3% above current levels. • This potential shift in capital flow comes as the stock market closes the week in the red despite positive US economic data and anticipation surrounding NVIDIA.

• US Treasury yields rose between 2.3 and 4.7 basis points heading into the weekend, shifting the market from bear steepening to flattening and erasing previous drops from a Treasury buyback. • Brent crude climbed to $94.4, its highest level since mid-July, as markets react to escalating geopolitical tensions. • US Treasury Secretary Bessent issued a stern warning in the Financial Times against Iran's trading partners, threatening global isolation for nations serving as "financial arteries" for the regime.

• US Treasury Secretary Bessent increased long-term Treasury buybacks in an off-cycle move, signaling to markets that a specific yield pain barrier exists. • Intra-EMU spreads rose throughout August, with Italy, Belgium, and France underperforming, suggesting ongoing market concerns regarding their public finance records. • While US yields are rebounding from recent lows, the US dollar remains stagnant, potentially indicating a loss of credibility due to perceived political interference in financial markets.

• European markets experienced a shift from bear steepening to bear flattening yesterday, with German yield curve changes ranging from +2.4 bps (30-yr) to +5 bps (2-yr). • EU swap rates also rose, adding between 0.9 bps for 30-year rates and 4.5 bps for 2-year rates, driven by higher energy prices and the US/Iran stalemate. • In Australia, RBA Assistant Governor Kent indicated that softening housing market conditions may reduce the need for further monetary policy constraints.

• The US Treasury announced it is at least doubling the size of liquidity support buyback operations for longer-dated nominal coupon securities (10y to 20y and 20y to 30y). • The maximum size per operation will increase from $2 billion to at least $4 billion. • This policy change takes effect on September 9 and will remain in place through the end of the current refunding quarter on November 4.

• The US yield curve experienced a bear steepening yesterday, despite a lack of specific economic or monetary data triggers. • Daily yield changes varied across the curve, ranging from a modest +0.6 bps for 2-year notes to +4.7 bps for 30-year bonds. • Notably, the US 30-year yield surpassed 5.3%, marking the first time this threshold has been crossed since 2007, just before the global financial crisis.

• Japan's economy grew by 0.3% quarter-on-quarter (1.1% annualized) in Q2, missing the consensus estimate of 0.5% and decelerating from Q1's 0.5% growth. • The growth was driven almost entirely by net exports, as exports rose 0.5% while imports contracted by 1.5%. • Domestic demand remained weak, characterized by flat private consumption and a 1.2% decline in business spending.

• US core bonds are experiencing bear steepening pressures, with the 30-year Treasury note remaining near year-to-date highs, the highest levels seen since 2007. • China's industrial production growth slowed to 4.5% year-over-year, down from 5.3%, while year-to-date growth dipped slightly to 5.3%. • A significant economic divergence has emerged in China, where strength in the AI and advanced manufacturing sectors is contrasting with widespread weakness across the rest of the economy.

• Traders are preparing for a high-impact week from August 10 to August 16, 2026, focusing on macroeconomic data from the US, UK, Germany, and New Zealand. • A primary highlight of the schedule is the upcoming Reserve Bank of Australia (RBA) meeting, which will determine key monetary policy directions. • Market participants are closely monitoring US wholesale producer price indices, as rising production costs typically signal higher inflation and potential interest rate hikes.

• India's economic agenda this week focuses on monetary policy, business activity, and the country's external financial position. • The Reserve Bank of India’s Monetary Policy Committee (MPC) will meet from August 3 to 5 to determine key policy decisions. • Governor Sanjay Malhotra is scheduled to announce the official policy outcome on August 5, alongside the release of HSBC Manufacturing and Services PMI data.

• The Newsquawk "Week In Focus" report outlines a dense economic calendar for the period of August 3rd-7th, 2026, highlighting critical global data releases. • Key events include the OPEC JMMC meeting, Chinese Manufacturing and Services PMIs, and the US Treasury Refunding Announcement (QRA). • Market volatility is expected as investors analyze the US Jobs Report, JOLTS job openings, and ISM Manufacturing PMIs to gauge economic health.

• Financial markets recently rallied on hopes that a pause in military confrontation between the US and Iran signaled the start of behind-the-scenes negotiations. • Despite the optimistic market sentiment, there has been a lack of concrete news or official confirmation from the involved parties regarding a formal negotiating process. • This volatility highlights how geopolitical tensions and the anticipation of diplomatic breakthroughs directly influence short-term financial market forecasts.

• The European Central Bank (ECB) is reportedly preparing to raise interest rates during its upcoming September meeting, according to Bloomberg sources. • While the ECB kept rates steady during its most recent session, Chair Christine Lagarde acknowledged that internal discussions regarding a hike have already begun. • This potential shift follows Lagarde's assertion that a significant volume of economic data is expected in the coming weeks, which will inform the bank's final decision.

• The European Central Bank (ECB) previously raised its deposit rate by a quarter point to 2.25% following a surge in eurozone consumer prices from 1.9% in February to 3.2% in May. • Recent data shows that the Consumer Price Index (CPI) slowed to 2.8% in June, indicating a cooling trend in inflation. • This deceleration in price growth is significant as it provides the ECB with a potential justification to pause its current monetary tightening cycle.

• The European Central Bank (ECB) is expected to keep its main policy rate steady at 2.25% during today's meeting. • Investors are closely monitoring the ECB for hints regarding potential policy shifts in September, which will include updated economic forecasts. • South Korea reported stronger-than-expected Q2 GDP growth of 0.6% quarter-over-quarter (3.7% year-over-year), driven by semiconductor exports and growth in manufacturing and services.

• Energy markets are experiencing significant volatility following an escalation of conflict in the Middle East. • Key drivers include the United States expanding the scope of its airstrikes and Houthi rebels, allied with Iran, implementing a maritime blockade in the Bab-el-Mandeb Strait. • Brent crude oil prices reacted sharply to the instability, reaching an intraday high of $95.5 before settling slightly lower at $94.5.

• Japanese Finance Minister Satsuki Katayama announced on Wednesday that the government is prepared to take "decisive action" in the foreign-exchange markets if necessary. • While signaling readiness to intervene, Katayama declined to specify the exact currency levels or exchange rates that would trigger such a move. • This stance is critical as Japan seeks to stabilize its currency and prevent excessive volatility that could impact the national economy.

• The US-Iran conflict has entered its sixth consecutive day of escalating hostilities, with both nations intensifying their military strikes. • Iran has targeted critical infrastructure in Kuwait, specifically attacking power generation and water desalination plants, while maintaining a strategic grip on the Strait of Hormuz. • The situation is critical due to the potential for the conflict to expand, with threats remaining that Houthi rebels and the Bab-al-Mandab strait will be drawn into the fighting.

• US stock markets are showing increased vulnerability, with the Nasdaq dropping 1.5% yesterday as momentum stocks face defensive selling. • Despite benign June CPI and PPI figures, Dallas Fed President Logan warned that inflation is not yet on track to hit the 2% target, suggesting interest rates may need to remain modestly higher. • Risk aversion has spread to Asian markets this morning, with indices in China, Taiwan, and Japan seeing declines between 3% and 6%.

• Next week's economic outlook focuses on the headline Consumer Price Index (CPI) reading, which is expected to cool due to a decline in energy prices. • Retail sales are also projected to soften, a trend driven in part by lower gasoline costs. • While consumer spending has shown resilience recently, analysts warn that weakening fundamentals could create economic headwinds in the coming months.

• Oil prices dominated market attention today due to a lack of other significant economic drivers. • The focus remains on the collapse of a ceasefire, raising concerns that the US and Iran are far from a permanent agreement. • A primary point of contention is the need to ensure safe and unhindered maritime passage through the strategically vital Strait of Hormuz.