- US July ISM manufacturing PMI 52.8 vs 52.0
- July final S&P Global US PMI 52.2 vs 52.3 expected
- OPEC output rose 310k bpd in July, still far undershooting quotas
- It's early in the quarter, but Atlanta Fed GDPNow for 3Q falls to +1.3% from +2.1% last
- Pelosi to visit: What's the Taiwan trade?
Markets:
- Gold up $6 to $1771
- US 10-year yields down 5.3 bps to 2.58%
- WTI crude oil down $5.03 to $93.59
- S&P 500 down 16 points to 4117
- JPY leads, CAD lags
The new month started with a new theme: US dollar weakness. The ongoing decline in Treasury yields continues to unwind some of the big dollar gains this year with USD/JPY particularly heavy. It was the fourth day of strong selling in USD/JPY as the market pares back expectations of Fed hikes.
Adding to the safe haven trade is the potential for trouble around Pelosi's visit to Taiwan, which is now reportedly schedule for 10:30 pm ET local time on Tuesday and going through early Wednesday. There's plenty of talk, but the Taiwan ETF was down just 1.8% today so I don't think the market is putting too high of a probability on anything dramatic.
The drop in oil was a curious move because it didn't fit with market sentiment or cross-asset moves. Some pointed to moderate softness in global PMIs but that's a stretch. More likely is that the market is feeling jitters ahead of Wednesday's OPEC+ meeting.
Canada was on holiday Monday so the fall in the loonie isn't totally trustworthy but oil and gas both fell around 5% so there's a reasonable basis for the USD/CAD move.
In the day ahead, also keep an eye on EUR/USD as it challenges the top of the recent range. Things aren't rosy in Europe but it's fallen a long way.
