Headlines:
- UK July CPI +10.1% vs +9.8% y/y expected
- Sterling does the rise and fall as UK inflation hits 40-year high
- The surge in UK yields is rippling across global bonds
- Kiwi fails to find comfort from hawkish RBNZ
- Eurozone Q2 GDP second estimate +0.6% vs +0.7% q/q prelim
- US MBA mortgage applications w.e. 12 August -2.3% vs +0.2% prior
- Musk clarifies tweet about Man Utd bid, says he is not buying any sports teams
Markets:
- USD leads, AUD lags on the day
- European equities lower; S&P 500 futures down 0.9%
- US 10-year yields up 6 bps to 2.885%
- Gold down 0.4% to $1,768.73
- WTI crude down 0.2% to $86.33
- Bitcoin down 0.9% to $23,754
The day began with some shenanigans involving Elon Musk as he joked about buying Manchester United. It was some entertainment to kick start proceedings before markets quickly focused on the double-digit UK inflation print, the highest in 40 years.
The pound got a knee-jerk push higher only to fall back almost immediately, as traders reassess the dire outlook to the UK consumer. GBP/USD moved up from 1.2110 to 1.2140 before falling back now to fresh lows of 1.2060 as the dollar is seen firming across the board.
The UK inflation data kicked off a heavy round of selling in the bond market with UK yields surging and that spilled over to Europe and the US as well. 10-year Treasury yields are now knocking on the door of its 100-day moving average near 2.89% and that is underpinning USD/JPY to move up just above 135.00 on the day.
Higher yields seems to also be taking a toll on equities with US futures marked lower, after also having seen the S&P 500 test its 200-day moving average in trading yesterday. S&P 500 futures are down 0.9% and that is reflecting a more risk-off mood where the dollar is gaining all across the board.
USD/CAD is back up by 0.5% to above 1.2900 while AUD/USD is down over 1.3% to 0.6930 and NZD/USD down 0.9% to 0.6285, with the kiwi failing to even find any comfort from a more hawkish RBNZ earlier in the day.
It is now over to US retail sales and the FOMC meeting minutes to decide the next steps on the day.
