Cryptocurrencies Higher Following July CPI Report — Market Talk

0906 ET - A July CPI reading that matched expectations is providing support for major cryptocurrencies, with bitcoin up 0.6% to $64,051, ethereum gaining 1.5% to $1,909, XRP rising 0.2% to $1.02, and solana advancing 0.8% to $76.62. While the inflation news is supportive for cryptocurrencies, the major focus continues to be institutional funds flowing into ETFs, says Sandeep Pyapali of Mesta in a note. "The inflation trend is still worth watching, but the more durable trade is the one moving corporate dollar flows off legacy rails and onto instant settlement--that shift doesn't pause for a CPI print," says Pyapali. ([email protected])0904 ET - Yields on U.K. and eurozone government bonds fall further after the release of the U.S. inflation data for July. Annual headline inflation decelerated to 3.4% in July from 3.5% in June, in line with the consensus forecast by economists in a WSJ poll. Annual core inflation eased to 2.5% from 2.6% in June. The data has led investors to lower their expectations of the U.S. Federal Reserve raising interest rates in September, causing bond yields to fall. Ten-year gilt yields last trade at 4.940%, down from 4.947% prior to the data release, Tradeweb data show. Ten-year Bund yields are down 1.2 basis points on the day to last trade at 3.136%. ([email protected])0901 ET - Treasury yields hold mostly steady after July CPI comes in as expected. Consumer prices increased 3.4% year-over-year, down from 3.5% in June and in line with economists' views. The 2-year yield is at 4.178%, down slightly from 4.184% before the report's release. The 10-year yield is at 4.655%, up slightly from 4.648%. More data on price pressures will be available tomorrow from the PPI report, another inflation measure that feeds into the Fed's preferred inflation measure, PCE. ([email protected])0900 ET - The dollar extends its losses slightly and Treasury yields stay lower after data showed U.S. inflation eased in line with expectations in July. Annual inflation fell to 3.4% in July from 3.5% in June while core inflation dropped to 2.5% from 2.6%, as anticipated by economists in a WSJ survey. Money markets price the probability of the Federal Reserve raising interest rates in September at 39%, compared with 48% before the data, according to LSEG. The DXY dollar index falls to an intraday low of 99.641 after the data, from 99.785 beforehand. The 10-year Treasury yield falls 3 basis points to 4.653%, little changed from before the data, LSEG data show. ([email protected])0836 ET - The economic differences among eurozone countries have narrowed in recent years, contributing to a more stable monetary union, PIMCO's Konstantin Veit and Nicola Mai say in a note. The GDP levels among the peripheral countries such as Portugal, Greece, Spain, Italy, and the largest economy, Germany, are converging, they say. This is a positive development for the eurozone, the portfolio managers say. "The eurozone appears significantly more stable today than it did a decade ago, when the region faced an existential crisis." ([email protected])0723 ET - Yields on U.K. and eurozone government bonds decline as investors seek news on progress in U.S.-Iran negotiations over reopening the Strait of Hormuz. Focus is also on U.S. inflation data due at 1230 GMT. The data are likely to show the impact of the Middle East conflict on U.S. prices and potentially provide clues on the possible timing of a U.S. Federal Reserve interest-rate rise. Ten-year gilt yields fall 1 basis point to 4.943%, Tradeweb data show. Ten-year Bund yields fall 0.8 basis points to 3.140%. ([email protected])0719 ET - Bitcoin turns marginally higher as risk appetite improves on hopes for a U.S.-Iran deal over the Strait of Hormuz. "The mood has improved slightly in the last 24 hours, with Pakistan saying that the U.S. and Iran are close to 'some sort of arrangement'," XM analyst Raffi Boyadjian says in a note, citing media reports. However, even if an agreement is reached, it will take time for the Strait to reopen while any mistrust about compliance by either side could see the deal fall through, he says. Elsewhere, markets await U.S. inflation data at 1230 GMT which could provide hints on the Federal Reserve's interest-rate path. Bitcoin rises 0.6% to $64,086, LSEG data show. ([email protected])0704 ET - Rising oil prices due to the Middle East conflict could cause U.K. government bonds, or gilts, to perform poorly compared to their eurozone and U.S. peers, RBC Capital Markets strategists say in a note. Gilts are highly sensitive to oil-price movements and rising energy prices are likely to have a bigger impact on gilt yields, driving them higher, they say. The price of Brent crude falls 0.2% on the day to last trade at $89.10 per barrel, but it is still around 13% higher than last week's low of $78.11 a barrel. Ten-year gilt yields fall 0.7 basis points to last trade at 4.946%, Tradeweb data show. ([email protected])0659 ET - Treasury yields fall while the dollar trades steady ahead of U.S. inflation data at 1230 GMT which are key for interest-rate expectations. Federal Reserve Chair Kevin Warsh has refrained from providing policy guidance, placing more emphasis on data. Money markets currently price a 48% chance of a 25 basis-point rate rise in September, according to LSEG. Economists in a WSJ survey expect annual inflation eased to 3.4% in July from 3.5% in June. Meanwhile, oil prices are slightly lower after media reports, citing Pakistani officials, that the U.S. and Iran are close to an agreement. The 10-year Treasury yield falls 1.6 basis points to 4.668%, Tradeweb data show. The DXY dollar index trades flat at 99.831. ([email protected])0611 ET - U.S. inflation data due at 1230 GMT could drive market movements in the short term, but it could have minimal influence on the Federal Reserve's rate decision in September, analysts at Metzler Capital Markets say in a note. After June core inflation data came in weaker-than-expected, markets are keen to see if this trend continued in July or if the June reading "was merely an anomaly," the analysts say. The Fed could wait for additional upcoming data releases, including producer price index data, personal consumption expenditures data, and developments in the Middle East to guide its rate decision, they say. ([email protected])0548 ET - China's retail sales growth likely rose further to 1.5% year-over-year in July from 1.0% in June, according to Goldman Sachs in a research note. "Favorable base effects may have boosted year-on-year growth in automobile and home appliance sales, despite the waning impact of the ongoing consumer goods trade-in program," GS says. Automobile sales volume growth improved modestly in July, the bank says. GS's sector analyst's tracking suggests that year-over-year contraction in home appliance sales also narrowed from June, the bank says. ([email protected])0528 ET - The Japanese yen's renewed falls in recent days suggests market participants remain unconvinced that interventions will prove successful in strengthening the yen without a change in fundamentals, MUFG Bank's Lee Hardman says in a note. If there is no change in fundamentals, speculators could rebuild bets on a weaker yen as stable financial market conditions remain supportive for carry trades, where investors borrow in a low-yielding currency to invest in one with higher yields, he says. One potential change in fundamentals is the prospect of the Bank of Japan accelerating interest-rate rises, although this isn't currently helping the yen, he says. The dollar falls 0.2% to 158.96 yen after earlier reaching a 12-day high of 159.45, according to LSEG. ([email protected])