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A bit more calm was restored to the markets during the latter part of the New York trading session as traders were careful not to get too carried away with North Korea jitters.

  • U.S. crude oil inventories down by 6.5M barrels vs. 2.6M forecast
  • Canadian housing starts up from 213K to 222K vs. 204K forecast
  • Canadian building permits rebounded by 2.5% vs. projected 1.8% drop
  • U.S. preliminary non-farm productivity up by 0.9% vs. 0.7% consensus
  • U.S. preliminary unit labor costs up by 0.6% vs. projected 1.1% gain
  • U.S. final wholesale inventories up by 0.7% vs. expected 0.6% uptick
  • Fed official Bullard: Can leave rates low for now and evaluate inflation data
  • Fed official Evans: Reasonable to start balance sheet runoff in Sept
  • RBNZ kept interest rates on hold at 1.75% as expected

Major Events/Reports

Risk-off flows slow down

U.S. stocks started off on a weak note as market watchers were still feeling the tensions with North Korea and the risk-off vibes from another attack in Paris during the previous trading session. Gold, which is often treated as a safe-haven, was able to benefit from all this.

  • The Dow 30 index closed 36.64 points down to 22,048.70 (-0.17%)
  • The S&P 500 index was down 0.90 points to 2,474.02 (-0.04%)
  • The Nasdaq closed 18.13 points down to 6,352.33 (-0.28%)

U.S. bond yields were also lower as headlines from state-run news agency KCNA indicated that Pyongyang is looking into the simultaneous firing of four Hwasong-12 intermediate range missiles at Guam.

  • U.S. 10-year yield down 1.43% to 2.249%
  • U.S. 30-year yield down 1.46% to 2.825%
  • U.S. 5-year yield down 1.46% to 1.807%

Commentary from Fed officials

Fed official Bullard was back on the podium, sharing his views on inflation and monetary policy. In an interview, he mentioned that he’s not too optimistic about seeing inflation gains this year, adding that the central bank does not need to hike pre-emptively. He said that the Fed can leave rates low for now then evaluate inflation data first.

Preliminary unit labor costs posted a slower than expected 0.6% gain for Q2 versus the estimated 1.1% increase, underscoring weak wage growth that could feed into subdued inflationary pressures. This was likely a result of a stronger than expected increase of 0.9% in non-farm productivity versus the projected 0.7% uptick.

Fed official Evans also cited that the recent dip in inflation should prompt policymakers to rethink their outlook. However, he did say that annual inflation could still reach 2% in the next few years and that it’s reasonable to start the balance sheet runoff by September since this probably won’t pose any financial stability risks.

RBNZ statement

Before New York session traders called it a day, the Reserve Bank of New Zealand announced its monetary policy decision to keep interest rates unchanged at 1.75% as expected.

In their official statement, RBNZ policymakers said that there are still plenty of uncertainties that remain and that they might need to adjust accordingly. They also noted that headline inflation is likely to decline in the coming quarters and that a lower NZD is needed. Keep your eyes and ears peeled for more jawboning from RBNZ head Wheeler in his presser!

Major Market Mover(s):


The lower-yielding yen and franc returned some of their gains from previous trading sessions as market fears seemed to ease.

EUR/JPY pulled up from a low of 128.42 to a high of 129.46, GBP/JPY recovered to the 143.00 handle, AUD/JPY is up to 86.80, EUR/CHF retreated to a high of 1.1355, and AUD/CHF climbed from a low of .7569 to a high of .7605.

Watch Out For:

  • 11:00 pm GMT: RBNZ presser
  • 12:50 pm GMT: Japanese core machinery orders (3.6% rebound expected, 3.6% decline previous)
  • 12:50 pm GMT: Japanese PPI (2.4% expected, 2.1% previous)
  • 2:00 am GMT: Australian MI inflation expectations (4.4% previous)
  • 2:10 am GMT: RBNZ head Wheeler’s testimony
  • 5:30 am GMT: Japanese tertiary industry activity index (0.2% expected, -0.1% previous)