United States of America

USD is weakening against EUR but strengthening against GBP and JPY.

Investors are focusing on the July inflation data. The consumer price index rose from –0.1% to 0.2% MoM and fell from 3.0% to 2.9% YoY, while the core indicator adjusted from 0.1% to 0.2% and from 3.3% to 3.2%, respectively. Thus, the overall annual value reached its low since March 2021 and the core value since April 2021, justifying the US Fed forecasts. The positive dynamics are due to an increase in housing costs by 0.4% and food costs by 0.2%. Most experts assume that regulator officials will adjust the interest rate three times this year, with the first change in September potentially amounting to –50 percentage points.

Eurozone

EUR is strengthening against JPY, GBP, and USD.

Eurozone Q2 gross domestic product (GDP) increased by 0.3% QoQ and 0.6% YoY, according to the forecasts. On the other hand, industrial production data showed a change of –0.1% MoM instead of the expected 0.4% and –3.9% against –2.9% YoY, hindering the region’s economic recovery. Against this backdrop, European Central Bank (ECB) officials may continue to ease monetary policy. A Reuters poll of leading economists showed that most expect interest rates to be cut twice more this year, in September and December. Investors had previously expected three more cuts in borrowing costs this year.

UK

GBP is weakening against USD and EUR but is ambiguous against JPY.

The July consumer price index changed from 0.1% to –0.2% MoM and from 2.0% to 2.2% YoY, against the forecast of 2.3%. The core indicator fell from 0.2% to 0.1% and from 3.5% to 3.3%, respectively, against the expected 3.4%, raising the possibility of further monetary easing by the Bank of England. The indicators rose less than expected and are in line with the Bank of England’s calculations, assuming average inflation by the end of the year at 2.75%.

Japan

JPY weakens against EUR and USD but has ambiguous dynamics against GBP.

Today, incumbent Prime Minister Fumio Kishida announced he will not run in the ruling Liberal Democratic Party’s leadership election next month. It will end his three-year term when the party elects a new chairman. The media speculate that the resignation is related to a series of major financial conflicts within the party. Still, economists note that his decision is dictated more by the prolonged fall of the yen to a nearly 40-year low against the American dollar, leading to higher food and fuel prices and weakening consumer confidence in an economy that has only just begun to recover from years of deflation.

Australia

AUD is weakening against EUR and USD but has ambiguous dynamics against JPY and GBP.

On Thursday, investors are awaiting the publication of July labor market data. According to preliminary estimates, the unemployment rate will remain at 4.1%, the labor force participation rate will be at 66.9%, and employment will slow from 50.2K to 20.2K. Overall, the sector may prove resilient, helping to maintain high interest rates from the Reserve Bank of Australia (RBA).

Oil

Oil prices are trading in narrow sideway ranges under the influence of several opposing factors.

Pressure on the quotes is exerted by a decrease in fears about a direct conflict between Iran and Israel, which leads to a decrease in the risk premium. Yesterday, US President Joe Biden told reporters that the Iranian authorities might abandon the attack if an agreement is reached to end hostilities in the Gaza Strip. It was confirmed by several sources in the Iranian government. On the other hand, the downward dynamics are hindered by the reduction in US oil reserves. According to the American Petroleum Institute (API), last week, they amounted to 5.205M barrels. Today at 16:30 (GMT 2), a report from the Energy Information Administration of the US Department of Energy (EIA) is due, which may reflect a change of –1.900M barrels, supporting oil quotes.