Cooler US inflation lifts bets on a September rate cut
Both the YoY and MoM CPI numbers came out lower than expected, and market bets on the Fed cutting in September rose to an 84% chance. US Treasury yields ended around 10bps lower across the entire curve, with the 10-year yield now at 4.20% and the 2-year yield at 4.52%.
The DXY index slipped to 104.44 as the Euro traded near 1.0900 and the Pound near 1.2950. The biggest move came in the Yen as it closed 1.75% stronger at 158.80 after hitting 157.40 earlier on rumours of intervention from the Bank of Japan.
This morning, there was some consolidation in markets, with the Euro currently at 1.0870, the Pound at 1.2910, and the Yen at 159.10. The Rand rallied to R17.93 levels on the back of the softer Dollar before settling back to close at R18.01. Earlier in the day, local manufacturing and mining production numbers were both negative but had little effect on the Rand. Look out for US PPI numbers due out later today.
Gold regains the $2,400 level on the back of the rate cut hopes
Gold rallied in the wake of the cooler US inflation data, closing 1.85% stronger at $2,415, while Platinum and Palladium ended firmer as well. This morning, there has been some pullback as markets consolidate, and we have Gold trading softer at $2,408.
China’s trade balance grew more than expected as exports jumped significantly, but imports were lower than expected, raising demand concerns. Brent crude trades fairly flat at $85.55, while WTI sits at $82.85.