2024-07-14 02:20:00 ET
Summary
- The soft-landing phase appears to be ending, and the deceleration appears to be intensifying.
- Given the delay of plenum, comments by Xi, and the disappointing economic performance post-Covid, expectations or hopes were running high for new stimulative measures.
- In the coming days, the UK may report firmer CPI, weaker labor market conditions, and a fall in retail sales.
Slowing US jobs growth, the third consecutive rise in the unemployment rate, and the softer than expected CPI are a watershed. Although the Federal Reserve will not cut rates when it meets at the end of the month, Chair Powell will likely lay the groundwork for a cut in September. Indeed, the Fed funds future market has priced in slightly more than a 25 bp cut. The deteriorating economic conditions dragged US two-and 10-year yields to their lowest in around three months. This weighed on the dollar and reinforced the sense that an important top for the dollar is in place. The contrast with the UK's better than expected May GDP that helped lift sterling to new highs for the year near $1.30, while the decline in US rates and speculation of Japanese intervention saw the greenback tumble from around JPY161.75 to slightly below JPY157.40. The euro pushed above $1.09 at the end of last week. The US dollar frayed support near CAD1.3600 but quickly recovered, though remained capped near CAD1.3650....
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Week Ahead: Following Up A Watershed Week