The key release this week was the US CPI print. The miss on the headline was referenced by US President Biden by saying that inflation may be moderating. The reaction in markets was as expected as US10 yields fell, the USDJPY took a leg lower and gold and silver were both supported. The rally higher in stocks was due to the market pricing out a 75bps hike for September, but exercise caution as analysts are divided over whether this is a bear market rally or the start of a new bull market. One thing noteworthy from this week is that economic data is back to having a strong impact on currencies. A trend that looks set to continue.

Other key events from the past week

• USD: Key inflation data, Aug 10: US core inflation fell lower below the market’s minimum expectations at 5.9% y/y. This resulted in US10-year yields falling and dragged USDJPY lower as well as propelling gold and silver higher.
• US Stock: Bear market rally? Aug 11: US Stocks pushed higher after the midweek US CPI miss as investors dialled back expectations of a 75bps Fed hike in September. However, many analysts are unsure whether this is just a bear market rally or part of a newly forming bull market. Exercise extra caution!
• EUR: Rhine river impassable? Aug 12: The Rhine river in German is effectively being seen as impassable at a key point on August 12. Will this add to calls for a more severe euro recession? Will EURJPY move lower medium term?

Key events for the coming week

• GBP: UK labour data, Aug 16: The BoE brought forward recession projections to 2022 and projected it to last for 5 quarters at their last meeting. Any signs of slowing labour data are likely to weigh further on the GBP.
• Time to sell a possible bear market rally? The S&P500 is entering a weak period during the summer. Will we see a period of weakness across major indexes between now and October? 
• NZD: Interest rate decision, Aug 17: At the time of writing STIR markets are pricing in a 99% chance of a 50 bps rate hike and 66% chance of a 75bps hike. However, will the RBNZ move to a more dovish stance going forward as global recessionary fears grow? Will AUDNZD gain?

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