Ian Reynolds
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Overnight
US GDP Q2 2025
A strong GDP print with quarterly PCE benign had equity and bond markets rallying and the USD dropped across the board.
The US yield curve is steepening in response to rate cuts expectations.
- High Yield: 3.925%, slightly above the When-Issued (WI) yield of 3.922%, indicating a tail of 0.3 basis points.
- Bid-to-Cover Ratio: 2.49, reflecting a moderate level of demand (lower than the 2.79 ratio in the July 2025 auction but within typical ranges).
- Total Amount: $44 billion.
- Allocation:
- Primary dealers: 9.79%
- Direct bidders: 12.77%
- Indirect bidders: 77.45%
- Coupon Rate: 3.875%.
- CUSIP Number: 91282CNW7.
- Issue Date: September 2, 2025.
- Maturity Date: August 31, 2032.
EU Consumer Confidence August 2025
EU economy stagnant with inflation expectations rising due to new tariff structures.
EU Monetary Policy Meeting Minutes
The European Central Bank (ECB) published the account of its monetary policy meeting held on July 23-24, 2025, on August 28, 2025. Key points from the meeting include:
- Interest Rates Unchanged: The ECB Governing Council decided to maintain the three key interest rates, with the deposit facility rate at 2.00%, the main refinancing operations (MRO) rate at 2.15%, and the marginal lending facility rate at 2.40%. This decision aligned with the ECB’s assessment that inflation is currently at the 2% medium-term target.
- Economic Resilience: The euro area economy showed resilience despite global uncertainties, particularly trade disputes. Financial markets had stabilised, with reduced volatility and a “risk-on” regime, despite earlier turbulence from tariff-related headlines.
- Inflation Outlook: Inflation was expected to remain around current levels for 2025, with a projected dip to 1.5% in Q1 2026 due to lower energy prices. Wage growth was slowing, supporting a decline in services inflation, and market-based inflation expectations had slightly increased.
- Policy Approach: The ECB emphasised a data-dependent, meeting-by-meeting approach to monetary policy, focusing on the inflation outlook, risks, and the strength of policy transmission. The updated strategy statement highlighted flexibility in responding to economic shocks.
- Uncertainty and Risks: While most members viewed inflation risks as balanced, some noted downside risks, and the global environment remained uncertain due to trade tensions. The ECB underscored the need for agile policy adjustments to maintain price stability.
The account reflects the ECB’s cautious stance, balancing economic resilience with vigilance toward inflationary pressures and global uncertainties
Breaking
Dollar weakens as September Fed cut bets grow [Reuters]
World’s best performing sovereign wealth fund bets on Europe over US [FT]
Bitcoin
BTC failing at these levels currently, despite good price action yesterday.
Commodities
Gold breaks resistance and looks at the all time high, which is 2 resistances away. Let's see if it confirms. Silver had a good day, too, currently at $39 even.
Bonds
Gilt yields can't break higher. Had a really good go at it for a week, but now rejected as rate cut fever pushed out shorts.
UK 10 Year Government Bond Yield Daily
Foreign Exchange
USD, via DXY, finally broke the short-term resistance as we look to test the bottom of the long-term support again at 96.50.
DXY Daily
Big spike in Offshore Yuan against USD as hot money rotates into Chinese equities and bonds.
USD/OFFSHORE YUAN Daily
Equities
The train never goes backwards. Look for a spike to the top of the new channel, above 21,800 will be a higher high.
Interesting
Africa Sees Surge in China Exports Shunned by US [Bloomberg]
Economic Indicators Today
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