Bitcoin Falls as Traders Eye U.S. Inflation Data — Market Talk
0817 GMT - Bitcoin falls as investors look ahead to key U.S. inflation data later in the week for further clues on the pace of expected interest rate cuts by the Federal Reserve. The data on Thursday are expected to show inflation accelerated to 2.9% year-on-year in August, according to a WSJ survey of economists. If inflation is higher than expected, it would cast doubts over the scale of anticipated rate cuts, Interactive Investor analyst Richard Hunter says in a note. It would also introduce the chance that a mix of elevated inflation and weak growth, or stagflation, is emerging and dent investor sentiment, he says. Bitcoin falls 0.1% to $111,276, LSEG data show. ([email protected])0758 GMT - The political uncertainty in Japan following Prime Minister Shigeru Ishiba's decision to step down is unlikely to derail the BOJ's policy stance, according to Nomura. Barring a significant economic downturn, the BOJ will likely maintain its cautious stance on rate hikes into 2026, Kyohei Morita and Yujiro Goto say in a note. Public surveys also show that inflation concerns remain high, reducing political pressure on the central bank to ease, they add. However, the probability of an October rate increase could decline marginally if political developments, especially the LDP presidential election and the formation of a new government, prove too uncertain, they write. "That said, we remain of the view that the BOJ's next hike will come in January." ([email protected])0754 GMT - Gold futures trade sideways, just shy of the fresh record set in the prior session. Futures are flat on $3,653.10 a troy ounce, after setting an all-time high of $3,655.50/oz on Friday. The precious metal has advanced after a weaker-than-expected U.S. jobs report fuelled interest rate cut expectations, MUFG analysts say in a note. Weak payroll data showed slower hiring and the highest unemployment rate since 2021 and traders are now pricing in nearly three cuts this year, MUFG says. Lower rates boost non-interest bearing bullion's appeal. Gold is also benefiting from renewed safe-haven demand as Russia intensifies its attacks on Ukraine. A government building in Kyiv was struck for the first time over the weekend in the largest aerial bombardment of the war since its start in 2022. ([email protected])0754 GMT - The dollar could enjoy some brief respite this week on potentially higher-than-forecast U.S. inflation data and an upcoming U.S. corporate tax payment, ING's Chris Turner says in a note. Economists in a WSJ survey expect data on Thursday to show inflation rose 0.3% month-on-month in August after a 0.2% rise in July. However, there is a risk of a 0.4% increase, Turner says. The U.S. corporate tax payment deadline of Sept. 15 could also provide some support to the dollar. The DXY dollar index falls 0.1% to 97.651 but ING expects it to rise to 98.50 this week. However, ING sees renewed losses next week when the Federal Reserve is expected to cut interest rates at the Sept. 17 meeting. ([email protected])0752 GMT - China could face more export headwinds should global and U.S. demand slow more significantly, HSBC economists say in a research note. China's August exports grew a moderate 4.4%, largely on the back of a sharper drop in U.S. shipments, they say. While the reciprocal tariffs on China have remained at 10%, the U.S. expanded steel and aluminum tariffs, they say. With external demand likely to remain weak, China could continue to emphasize providing domestic support to help achieve this year's GDP growth target, they say. The economists expect policies such as subsidies for consumption and measures such as urbanisation and improved social welfare coverage to drive sustainable growth. ([email protected])0720 GMT - Yields on U.K. government bonds trade steady in the absence of key market-moving data releases in the U.K. on Monday. Focus is on the French confidence vote on the government of Francois Bayrou. "There is a lot resting on this vote, and the markets will be taking notice of the outcome, as highly indebted nations cannot hide anymore," XTB's Kathleen Brooks says in a note. The 10-year gilt yields remain steady at 4.649%, Tradeweb data show. ([email protected])0709 GMT - Eurozone government bond yields are marginally higher, with investor focus turning to the European Central Bank's policy meeting on Thursday. The ECB is set to leave interest rates on hold. The return of inflation to the ECB's target level and the recent more robust economic data argue for unchanged rates, says Rothschild & Co Wealth Management's Bastian Freitag in a note. 10-year bond yields rise by up to 1 basis point, according to Tradeweb data. The 10-year Bund yield rises 0.7 basis points to 2.668%. ([email protected])0704 GMT - Weak U.S. payrolls data could justify a bigger, 50-basis-point interest-rate cut by the Federal Reserve in September, Standard Chartered's John Davies and Steve Englander say in a note. In August, nonfarm payrolls rose by 22,000, way below the 75,000 expected by analysts in the Wall Street Journal's survey. Payrolls also softened between the Federal Reserve's July and September meetings last year, resulting in a 50-basis-point rate cut, the strategists say. "We now expect a similar 50bps 'catch-up' cut by the Fed on Sept. 17, versus our prior 25-basis-point call," they say. However, sticky inflation and fiscal easing will limit scope for further cuts beyond that, according to their expectations. ([email protected])0702 GMT - The euro rises even as the French government is on the brink of a potential collapse, with Prime Minister Francois Bayrou expected to lose a confidence vote. Bayrou surprisingly called the vote following disagreements over his plans to cut the budget deficit. With a vote of no confidence widely anticipated, no immediate market reaction is expected, Commerzbank's Thu Lan Nguyen says in a note. "This is particularly true for the foreign exchange market, which has been largely unaffected by developments in recent weeks." The euro rises 0.1% to $1.1725 against a weaker dollar in the wake of Friday's worse-than-forecast U.S. nonfarm payrolls report. ([email protected])0657 GMT - It is hard to see Germany lifting itself out of stagnation, Carsten Brzeski at ING writes in a note. Exports to the U.S. continued to sink in July, figures show, reaching their lowest level since the end of 2021. Exports to other key partners including China also fell, highlighting the broad problems facing Germany's export-oriented economy, Brzeski says. With the stronger euro adding to trade tariffs among headwinds to external demand, Europe's largest economy looks set to drift through the rest of the year, he says. "All of this means that all hopes for a sustainable German recovery are on fiscal stimulus," Brzeski adds.([email protected]; @joshualeokirby)0648 GMT - French government bonds, or OATs, could remain under pressure if France's budget turmoil leads to new elections, Goldman Sachs analysts say in a note. However, they expect the 10-year French OAT-German yield spread to end the year below current levels. "Fresh elections could prolong OAT underperformance, but we maintain our baseline view of 10-year OAT-Bunds [yield spread] at 70 basis points at end-2025," they say in a note. The spread is currently 78.5 basis points, according to Tradeweb. Prime Minister Francois Bayrou's government will face a confidence vote over the budget on Monday, with risks of losing the vote. ([email protected])0636 GMT - The dollar stays at weaker levels after hitting a near three-week low on Friday following worse-than-expected U.S. nonfarm payrolls data. The data cemented expectations for the Federal Reserve to resume cutting interest rates by 25 basis points at the Sept. 17 meeting, LSEG data show. However, the data weren't soft enough to argue for a 50bp cut, Deutsche Bank analysts say in a note. The attention now turns to U.S. inflation data on Thursday for further hints on the pace of rate cuts. The DXY dollar index trades flat at 97.767, having hit a low of 97.430 on Friday. ([email protected])