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Inflation updates were the focus this week, and it looks like the data potentially signaled a peak in the recent high inflation environment.

It looks like traders priced in less aggressive central banks going forward, most notably a move away from the Greenback as it was the biggest loser this week.

Notable News & Economic Updates:

Ukraine halted oil exports to Europe on Tuesday due to a payment dispute, according to Russia’s Transneft

API reported surprise build of 2.156M barrels in crude oil inventories

China ends series of live fire military drills around the island of Taiwan

U.S. consumer prices index came in below forecast at +8.5% y/y in July, sparking peak inflation bets across the markets on Wednesday

Chicago Fed President Evans says it’s likely that the Fed will raise interest rates into next year to stop inflation.

The Bank of Thailand raised its key interest rate 25 bps to 0.75% in a 6-to-1 vote

U.S. announced in $1B in military assistance for Ukraine on Wednesday

BlackRock offers institutional clients bitcoin investing services

U.S crude oil inventories rose to more than 5M bbls; oil flow from Russia-to-Europe through the Druzhba pipline resumed

International Energy Agency raised their oil demand growth forecast for 2022 by 380K bbl/day

Intermarket Weekly Recap

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

The doldrums of Summer continued this week, characterized by another round of relatively light volatility and a lack of major economic or geopolitical catalysts.

Arguably, the only event of note was the latest inflation updates from the U.S., with the biggest market reaction coming in on Wednesday after the latest Consumer Price Index read. We saw a lower-than-expected increase in prices, clocking in at 0.0% m/m and the annualized read at +8.5% y/y vs. an expected +8.7% read.

The broad market quickly moved on this news, sparking U.S. dollar weakness on the possibility of the Federal Reserve becoming less aggressive on monetary policy tightening.  Risk-on sentiment caught a bid immediately, likely on the same idea of central banks potentially easing back on the rate hike pedal.

Aside from the U.S. CPI event, we got other data points from around the globe signaling a potential slowdown inflation ahead with China’s CPI coming in below expectations at 2.7% y/y, as well as producer prices slowing a bit in Japan to 8.6% y/y from 9.4% previous.

It’s probably notable that these dips in inflation rates have been mainly attributed to the recent dip in energy prices over the past two months. Oil peaked back in June around $124/bbl, now trading between $88 – $94 in August.

As mentioned earlier, these signs of “peak inflation” seemed to have sparked a bullish reaction in risk sentiment, clearly shown by the gains in equities, oil and crypto from Wednesday on. That reaction seems to have been limited though, possibly a reaction to several Fed members commenting after the inflation updates, saying that they will remain aggressive given how high inflation conditions are.

Crypto assets were the big out performers this week, likely helped by news that the Ethereum merge may be coming sooner than planned (devs announced a tentative date of Sept. 15), as well as major news from the institutional world that BlackRock (the largest asset manager in the world a portfolio of nearly $10T in assets) will introduce bitcoin investing to its institutional clients.

In the forex space, the New Zealand dollar took the top spot this week,  followed by the Aussie, both likely riding U.S. dollar weakness and the broad shift towards risk-on sentiment.

USD Pairs

Overlay of USD Pairs: 1-Hour Forex Chart

Overlay of USD Pairs: 1-Hour Forex Chart

Consumers’ expectations for inflation over the next year in the U.S. declined to 6.2%; three year inflation expectations fell to 3.2%

U.S. home inventory for sale shot up in July, jumping 31% y/y

U.S. wholesale inventories rose by 1.8% m/m in June, while May was revised higher to 1.9% m/m

U.S. consumer prices in July: +8.5% y/y vs. +8.7% forecast; largely due to fall in energy prices

U.S. mortgage applications rose by 0.02% (SA) since the previous week; the average 30-yr fixed-rate mortgage increased to 5.47%

U.S. weekly jobless claims came in at 262K vs. 248K previous, the highest in nine months

U.S. producer prices index dipped -0.5% m/m in July, largely due to fall in energy prices; core gained by +0.2% m/m vs. +0.4% previous

U.S. import prices for July: -1.4% vs. +0.3% previous; largely due to the fall in energy prices

UoM Consumer sentiment survey ticked up in August with the preliminary read coming in at 55.1 vs. 51.5 in July; inflation expectations fell to 5.0% vs. 5.2% previous

Federal Reserve Bank of Richmond President Thomas Barkin said on Friday that keeping rates high is needed to get inflation to a sustainable basis

GBP Pairs

Overlay of GBP Pairs: 1-Hour Forex Chart

Overlay of GBP Pairs: 1-Hour Forex Chart

BRC: UK retail sales up by 2.3%, boosted by hot summer as inflation pressure continues

Bank of England will probably need to raise rates again, Ramsden says

RICS: UK house prices on the rise despite fall in new buyer inquiries

U.K. GDP shrank 0.6% in June vs. estimated 1.2% contraction

U.K. industrial production fell 0.9% instead of an estimated 1.3% drop

EUR Pairs

Overlay of EUR Pairs: 1-Hour Forex Chart

Overlay of EUR Pairs: 1-Hour Forex Chart

Sentix investor confidence in august: -25.2 vs. -26.4 in July, -24.7 expectations

German final CPI reading unchanged at 0.9% as expected

France CPI for July: +6.1% y/y; +0.3% m/m

Industrial production was up by 0.7% m/m in the euro area in June; +0.6% m/m in the EU

CHF Pairs

Overlay of CHF Pairs: 1-Hour Forex Chart

Overlay of CHF Pairs: 1-Hour Forex Chart

Swiss jobless rate unchanged at 2.2% as expected

CAD Pairs

Overlay of CAD Pairs: 1-Hour Forex Chart

Overlay of CAD Pairs: 1-Hour Forex Chart

No events of note from Canada. Loonie price action was mixed, and based on its gains (against USD, GBP, EUR, JPY) and losses against the comdolls, the main influence on price was likely the broad lean towards risk-on sentiment discussed earlier.

NZD Pairs

Overlay of NZD Pairs: 1-Hour Forex Chart

Overlay of NZD Pairs: 1-Hour Forex Chart

New Zealand inflation expectations dip for the first time in two years to 3.07% vs. 3.29% previous

NZ annual credit card spending down (-0.5%) for first time in nine months

New Zealand house prices fell – 2.9% y/y, the first negative read in 11 years

New Zealand Overseas visitor arrivals for June: +30.1% m/m

Business NZ manufacturing index improved from 50.0 to 52.7

AUD Pairs

Overlay of AUD Pairs: 1-Hour Forex Chart

Overlay of AUD Pairs: 1-Hour Forex Chart

AU Westpac consumer sentiment drops by 3.0% in Aug amid surging prices

NAB business confidence index jumped from 2 to 7 in July

Australia inflation expectations ease from 6.3% to 5.9% in August

JPY Pairs

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Japanese Economy Watchers Sentiment index fell from 52.9 to 43.8 vs. 51.6 consensus

Japan current account deficit: ¥132.4B ($980 million) in June

Japanese producer prices slowed from 9.4% to 8.6% gain

Japan M2 Money Supply increased by 3.4% y/y in June

Preliminary Japan Machine Tool Orders for July: +5.5% y/y vs. 17.1%