US Equities Outperform But Does Little For The Heavy Greenback

Japan's Prime Minister Abe's health has been a perennial issue that is resurfacing now. Recall that his first term (2006-2007) due to ulcerative colitis, and he has been aided by medicine that was previously unavailable in Japan. He visited the hospital at the start of the week amid some press reports suggesting illness and has been unusually absent from parliament and press conferences. Reports suggest he has check-ups every six months, and the most recent one was in June. Not to get too far ahead of the story, but speculation of succession has begun swirling. Yet to be clear, an election will be held by late October next year. Abe and his cabinet have sagged in the opinion polls. If Abe steps down, Finance Minister Aso, who also served as Prime Minister for a year (September 2008-September 2009) would serve on an interim basis. Reports suggest Foreign Minister Motegi is trying to organize a bid. Abe has supported LDP policy chief Kishida over objections from his close advisers, but some think that Abe's rival, former LDP General Secretary Ishiba have the inside track. 

The dollar extended its pullback after it was rejected a little above JPY107 last week (FXY). It found bids today a little above JPY105, where there is an option for around $960 mln that expires today. There is another expiring option at JPY105.25 (~$530 mln) and a set between JPY105.80-JPY106.00 (~$855 mln). The Australian dollar is trading at new highs for the year (~$0.7275) in the European morning. It has risen above its 200-week moving average (~$0.7255) for the first time in over two years (FXA). The next important chart area is near $0.7300, but the intraday technicals are stretched. The Aussie's 10-day rally against the New Zealand dollar ended yesterday, and the cross has been subject to more profit-taking today. The PBOC set the dollar's reference rate at CNY6.9166, a touch firmer than the bank models implied, but the greenback fell anyways to a new seven-month low (~CNY6.9042) (CYB)


The UK reported stronger than gains in July consumer prices.CPIH rose 1.1% from a year ago. Economists had anticipated a decline to 0.7% from 0.8% in June. Core CPI rose to 1.8% from 1.4% instead of falling to 1.2% as predicted. The pandemic is changing both shopping and discount patterns, which in turn is impacting measured inflation. For example, seasonal clothing sales did not materialize, and this is translated into higher prices. Some businesses tried to pass on to the consumer the added costs of protective measures. Separately, gasoline prices rose by the most since January 2011. There are good reasons to expect that today's report does not signal a resurgence in inflation. New measures, including a cut in the sales tax for some purchases and other government measures to support businesses (including subsidies for restaurant meals), and lower energy prices should see price pressures ease.  

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Read more by Marc on his site Marc to Market.

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