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EU High Representative for Foreign Affairs and Security Policy Kallas: It is inconceivable that the frozen Russian assets will be returned to Russia unless Russia has paid reparations for the Ukrainian war.On August 30th, following the release of the PCE data, the Federal Reserve remains on track to cut interest rates at its September 16-17 meeting. Michael Lorizio, head of U.S. interest rate trading at Manulife Investment Management, said, "PCE reduces the risk of a September rate cut being derailed. At least from this perspective, the inflation component doesnt play any role in reducing the probability of a September rate cut." Long-term bond yields rose on Friday as traders closed positions before the long weekend and repositioned for the end of the month. Some interest rate hedges may also have an impact on the market, and the corporate bond market is expected to pick up next week as many people return from summer vacation. Lorizio said, "Were going to have a very busy week... The primary market and all the spread product markets are back in full swing, especially the corporate bond market." August employment data will also be released next Friday, which may be key to determining the Feds near-term policy.Dont expect to hear much from the Federal Reserve Board of Governors before their next meeting in mid-September. The Feds board of governors announced that no board members plan to make public appearances before September 7th. This puts us in the "interval" before the Feds September meeting, with Fed Governor Wallers speech Thursday evening likely to be the final statement from the board before the crucial September meeting. Theres still time to hear from regional Federal Reserve presidents on interest rate policy, including a speech on the US economy and monetary policy from St. Louis Fed President Moussallem scheduled for next Wednesday.On August 30th, Hong Kong Monetary Authority Deputy Chief Executive Chan Wai-min stated at the 7th Guangdong-Hong Kong-Macao Greater Bay Area Financial Development Forum that the HKMA actively encourages mainland enterprises to establish overseas business headquarters and corporate treasury centers in Hong Kong to coordinate the allocation of overseas funds. Regarding payments, the current global payment system still suffers from numerous intermediaries and high payment costs. With technological advancements, these issues will gradually be addressed. One example is the application of blockchain technology in the payment sector. Hong Kong is currently simultaneously promoting the use of central bank digital currency and commercial bank currency, hoping to provide more convenient and cost-effective solutions for future cross-border trade and investment payments.The Federal Aviation Administration announced the suspension of all SkyWest Airlines flights.

Before US Retail Sales, the US Dollar Index declines from a multi-year high due to cautious optimism

Daniel Rogers

Jul 15, 2022 11:33

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Bulls of the US Dollar Index (DXY), which hit a 19-year high earlier in the day at 108.65, find it difficult to gain momentum during Friday's Asian session.

 

The dollar index increased to a multi-year high against the six major currencies in reaction to recession fears and worries about the Federal Reserve's rapid rate hikes. However, the price decrease from the previous day was brought on by recent inconsistencies in Fedspeak and US statistics.

 

Among the most notable Fed speakers who sought to downplay the probability of an increase in interest rates were Christopher Waller, governor of the Federal Reserve, and James Bullard, president of the Federal Reserve Bank of St. Louis. Bullard of the Fed, however, noted that "up to this point, we've framed this conversation exclusively in terms of 50 vs 75." Reuters quotes Fed's Waller as saying that markets may have anticipated a 100 basis point rate increase in July too soon. It should be noted that the Federal Reserve will observe a blackout period before the July 28 Federal Open Market Committee meeting starting this weekend (FOMC).

 

The Producer Price Index (PPI) for final demand in the US increased to 11.3 percent on an annual basis in June, up from 10.9 percent in May, according to the US Bureau of Labor Statistics. This outcome was higher than the 10.7% market expectation. In addition, compared to the previous week's total of 235,000 and the market's projection of 235,000, there were 244,000 first claims for unemployment benefits for the week ending July 9. The number of weekly claims for unemployment rose to its highest level in five months.

 

It should be recalled that the previous day, DXY bulls were under pressure due to the shrinking spread between the 2-year and 10-year US Treasury rates. While 2-year bond coupons decreased by 0.75 percent to 3.12 percent, 10-year US Treasury rates finished Thursday at 2.95 percent, up 0.95 percent from the previous day. As a result, the difference between the coupons of short-term and long-term bonds shrank from 23 basis points (bps) on Tuesday to 17 bps.

 

The Wall Street benchmark had a mixed performance as a result of these moves, and as of press time, S&P 500 Futures had also seen moderate increases.

 

It will be vital to follow US Retail Sales, which are predicted to grow 0.8 percent MoM in June from -0.3 percent in May, in addition to watching Fed speakers for new encouragement. The Michigan Consumer Sentiment Index (CSI) preliminary readings for July, which are forecast to be 49.9 vs. 50.0 before, should therefore be watched for certain signs of future changes.


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