The US dollar is little changed versus the three major currency pairs. In the video above I will outline the key technical levels in play given the recent price action as the midpoint of the week and the speech from Fed chair Powell on Friday looms large in the future. The NZDUSD moved sharply lower after eight more dovish RBNZ rate cut.
On the economic front overnight, UK July CPI came in hotter than expected, with both headline and core inflation rising +3.8% y/y (vs +3.7% expected, prior +3.6% for headline; vs +3.7% expected, prior +3.7% for core).
The data underscores lingering inflation pressures, particularly in services inflation (steady at 5.2%) and core services (up to 5.0% from 4.7%), which remain a challenge for the Bank of England as stagflation risks build. The biggest driver was transport costs, especially airfares tied to summer holidays.
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For policy, the outcome reinforces expectations of a BOE pause in September, which markets had already priced at ~94% odds. As such, the inflation surprise is unlikely to materially shift pricing or provide strong upside for sterling. GBPUSD trades flat near 1.3490, with large option expiries at 1.3500 helping cap movement.
In the US, US MBA mortgage applications fell -1.4% w/w for the week ending August 15, reversing the prior week’s strong +10.9% gain. The market index slipped to 277.1 (from 281.1), with the refinance index down to 926.1 (from 956.2), while the purchase index was little changed at 160.3. The average 30-year mortgage rate edged up to 6.68% from 6.67%. This release is typically not market-moving, with applications remaining inversely correlated to mortgage rates. There are no other economic releases scheduled for the US today.
However, investors will be awaiting any new policy signals from the Fed as minutes from the last meeting are due today ahead of Chair Powell’s speech at Jackson Hole on Friday. The Fed has kept rates at 4.25%-4.50% all year, but tensions are rising as tariff-driven inflation risks could be just around the corner. On the other hand, there are,political pressure from Trump for cuts. The Fed is divided as we already know that Governors Waller and Bowman dissented, the first double dissent since 1993. Meanwhile, the markets largely expect a 25 bp cut next month, with scope for another later this year, making Powell’s outlook remarks at Jackson Hole highly anticipated. The market currently is pricing and 85% chance for a September cut.
ECB President Christine Lagarde was speaking today and said that while the euro-area economy showed resilience earlier this year, growth slowed in Q2 and is expected to weaken further in Q3. She noted that recent trade deals, including with the US, have not removed uncertainty, though outcomes are better than worst-case scenarios. The remarks offered no new policy signals, with markets still pricing only about 11 bps of easing by year-end, reflecting less than a 50% probability.
The NZDUSD moved sharply lower after the RBNZ delivered a dovish message, cutting the OCR by 25 bps to 3% while projecting lower policy rates through 2026. The bank highlighted spare capacity, stalled growth, and cautious household and business behavior as downside risks, with inflation expected to return to target by mid-2026. Updated forecasts show the OCR at 2.71% in Dec 2025 (prev. 2.92%) and 2.59% in Sept 2026 (prev. 2.90%), underscoring scope for further easing if inflation pressures continue to fade. While a 50 bps cut was considered, the committee favored a smaller move to allow gradual adjustment, reinforcing a clear dovish bias toward additional rate cuts.
Looking at the equity markets in the US, the major indices are trading lower implied by the futures
- Dow industrial average -14.27 points
- NASDAQ index down -47.02 points
- S&P index down -6.37 points.
In the US debt market, yields are little changed:
- 2-year yield 3.752%, -0.2 basis points
- five year yield 3.820%, -0.2 basis points
- 10 year yield 4.302%, unchanged
- 30 year yield 4.901%, unchanged
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