Yields still driving markets

Recap

Markets were subdued on Friday with final euro inflation numbers coming in as expected. On the week, the EUR was broadly lower, with GBP and USD finishing the week on higher yields.

Overnight, Chinese authorities disappointed markets by delivering a smaller-than-expected rate cut in order to stimulate their economy.

Rightmove data showed that house prices suffered their steepest decline since December 2022, with property sellers dropping prices by 1.9% in August.

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Today

Market rates

* Daily move - against G10 rates at 7:30am, 21.08.23

** Indicative rates - interbank rates at 7:30am, 21.08.23

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Data points

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Speeches

• None today.

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Our thoughts

Quiet start to the week - nothing major on the calendar today, with USD starting the week marginally stronger. August's services and manufacturing PMIs are due to be released on Wednesday, which will provide a gauge of how Europe, UK, and the US have performed so far this month. The week's focus will fall on Fed Chair Powell's speech at the Jackson Hole Symposium on Friday. A message of keeping rates higher for longer should support USD, which currently sits at a prior resistance level.

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Chart of the day

USD has been well supported over the last five weeks as treasury yields and real rates have been marching higher, taking the USD index back up the highs in June, where resistance has been met. A combination of better PMIs and a message from Powell suggesting higher rates for longer may well be the catalyst for the greenback to push this level, and create new highs.

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Have a great day.