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10/08/2026

Colours – 11 August 2026

Good morning,

Slight risk off overnight as hope fades for a quick Iran/ US peace deal. S&P slipped 0.1%, Nasdaq fell 0.3% and Dow off 0.1%. 6 out of 11 S&P sectors rose. Intel fell 4.1% after announcing a $15b share sale. The market’s tone was not panicked but it was wary and and feels more like headline fatigue to me. Brent settled up 5% at US$87.72 a barrel.

In other market news, Nvidia announced a $500b AI infrastructure financing platform with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR. This creates dedicated pools of capital for customers building AI data centres. However, it didn’t state any financial terms, investment commitments or timetable. The number is eye catching but the structure is a series of MOUs – and we know MOUs are not legally binding. What the announcement does confirm is that the AI capex cycle has outgrown the balance sheets of even the hyperscalers. What Nvidia is doing here is to partner Wall Street to finance its customers’ purchases of its own chips, the capital intensity of the buildout has crossed a threshold. Big Tech’s combined capex is now projected at $730b this year. The question is no longer whether the spending is real – it is whether the returns arrive before the capital runs out.

Di**it Trump had blown it again. He demanded Iran to pay compensation for people killed over “a 50 years period,” cited the USS Cole bombing (which the FBI attributed to al Qaeda, not Iran) and told reporters he would seek money for 52k protesters he claimed Iran had killed, a figure roughly 7 times higher than what human rights groups have documented - in any case, what does that has to do with him or the US? Iran had set out its own conditions over the weekend and now Di**it Trump ‘’counteroffer’’. Di**it Trump’s response was to match maximalism with maximalism.

US Treasuries fell as oil price surged. September hike probability ticked back up to 52% after falling to 44% on the payrolls print. UST 2 year yield up 4 basis points to 4.24%, UST 10 and UST 30 year yield up 5 basis points 4.70% and 5.25% respectively. VIX back at 15 handle.

In FX, USD strengthened with DXY up 0.2%. EUR down 0.2% and JPY gave back all and more of its gains after NFP miss. USDJPY up almost 160 pips or 1% for the day. The thing with currency intervention is that market has little to no faith in M*F/ BOJ and Fed’s strategy. BOJ rate hike expectations for September remain around 55%, about the same as Fed’s own probability. If the BOJ does not hike, JPY will resumes its slide regardless of how many dollars M*F sells. Gold gained 1.3% despite higher yield, so it means the BIG central bank is still buying. Silver up 3.5%. Sees range trade ahead.

Key Levels
EURUSD - 1.1480/1.1510 | 1.1580/1.1630
GBPUSD - 1.3410/1.3450 | 1.3550/1.3580
USDJPY - 157.80/158.50 | 159.60/160.60
XAUUSD - 4259/4304 | 4430/4522
DXY - 99.00/99.40 | 100.00/100.30

CPI tomorrow remains the week’s defining event. But for now, Di**it Trump has now added reparations demands to a negotiation that was already drowning in preconditions. Iran wants compensation. Di**it Trump wants compensation. Neither will pay the other. The Hormuz stays closed, oil premium rebuilds and the market that spent last Friday celebrating a peace deal is now pricing the absence of one. Headlines fatigue indeed. For today, we have RBA rates decision. Stay nimble.

Good luck and have a good day.

10/08/2026

Colours – 10 August 2026

Good morning,

US economy lost jobs in July and the market celebrated. Non Farm Payrolls came in at negative 23k vs 85k job gains expected. May and June number were revised down by a combined 103k. The 3 mths average is now 20k jobs per month, barely enough to keep up with working age population growth. Unemployment rate fell to 4.1% from 4.2% as 264k people left the workforce. Participation rate dropped to 61.4%, lowest since Feb 2021. So bad news is good news for risk markets. S&P closed at a record high, up 0.6%, Nasdaq up 1.3% and Dow up 0.3%. Tech and consumer discretionary shares led the charge. SpaceX rose 15.8%. Atlassian exploded 35.3% on earnings. Airbnb jumped 17.4%. Microchip Tech rose 13.9%. The 85.1% of the 436 S&P companies that have reported have topped estimates, well above average of 68 %. Brent closed Friday up 1.3% at $83.55 a barrel.

Over the weekend, the geopolitical picture sharpened in both directions. A US official who said on Friday that US anticipated an agreement between Iran and Oman on the Hormuz soon, with a commitment to restore commercial shipping without impediments after which US would lift its blockade of Iranian ports. Iran’s Araqchi said the Oman deal on shipping lanes is in its “final stages” but there are other listed conditions for reopening - US compensation for war damage, end of sanctions, end of military threats, lifting of the naval blockade and release of frozen Iranian assets. Di**it Trump told Axios that US was “low keying it” with Iran and “only semi negotiating”, added that Iran “has huge inflation and no money”. JD Vance said the goal was restoring pre conflict volumes through the Hormuz with a commitment from Iran not to fire on commercial vessels. The gap between the two sides remains enormous. Separately, Yemen’s Houthis attacked Saudi Aramco’s Jazan refinery on Sunday. The Saudis said a fire broke out but was extinguished with no injuries.

After NFP release, futures market is pricing September hike probability at 44%, down from 55% before the print and 67% a week ago. US Treasuries rallied as yields fell after the payrolls miss but bounced off intraday lows. UST 2 year yield down 5 basis points to 4.20%, UST 10 year yield down 3 basis points 4.65% and 30 year yield down 2 basis point to 5.20%. VIX just below 15 handle.

In FX, USD weakened on NFP and lower yield. DXY down 0.3%. EUR gained 0.3%. USDJPY lose some 170 pips to 156.67 after NFP miss but bounced off the low to close down 0.4% for the day. Japan’s finance minister said Japan and US had been “closely communicating” and would not hesitate to intervene. Looking at things, the weak jobs data is helping BOJ/ M*F’s intervention work as lower US yields narrow the rate differential and reduce JPY carry trade attractiveness. Let’s see how US CPI looks like on Wednesday. Gold surged 2.5% on lower yield and (again) rumours of BIG central bank buying. Read somewhere that PBOC adds to gold reserves for 21st straight month with China's gold reserves at 76.1m ounces at end of July, up from 75.4m at end June. Silver up 3.2%. USD does feel soft at these levels. Will trade the range with soft USD bias.

Key Levels
EURUSD - 1.1480/1.1510 | 1.1580/1.1630
GBPUSD - 1.3390/1.3430 | 1.3540/1.3580
USDJPY - 157.30/157.80 | 158.70/159.20
XAUUSD - 4218/4262 | 4377/4430
DXY - 99.00/99.40 | 100.00/100.30

The market is choosing to see what it wants to see – strong corporate profits, weaker jobs data keeping Fed on hold and an Iran peace deal just around the corner and one of those three assumptions will be tested by CPI on Wednesday. Consensus is 3.4% headline, 2.5% core. A soft print confirms the disinflation thesis, that kills the September hike and sends the S&P to new highs. A hot print reopens the rate hike debate into a soft labour market and stagflation. Rather light week in terms of economic data. We have RBA rates decision tomorrow, UK GDP, US PPI and Jobless Claims on Thursday, US Retail Sales and Preliminary U of Michigan Consumer Sentiment and Inflation Expectations on Friday. 3 Fed speakers this week. Stay nimble.

Good luck and have a good day.

07/08/2026

Colours – 7 August 2026

Good morning,

Risk markets took a breather overnight. S&P down 0.2%, Nasdaq off 0.1% and Dow fell 0.9%. 8 of 11 S&P sectors fell. SpaceX defied the ‘’lock up bears’’ with shares up 6.1% on the first day of the expiry window. Of the 382 S&P 500 companies that have reported so far, 84.8% have beaten analyst expectations, comfortably above the 68% long term average beat rate. Oil reversed course with Brent up 3.8% to $82.49.

An Iranian parliamentary committee drafting a bill to bar US, Israeli and other “hostile” vessels from transiting Hormuz, with fines of up to 20% of cargo value for violations. Iran is not preparing to hand back the Strait, it is preparing to own it permanently. Seems like this war, no matter which way you look, is a lose-lose situation for Di**it Trump. mote than 5 months into the war and he is now trapped between accepting an emerging Iran/Oman deal that would grant Iran control over the Hormuz, something he explicitly vowed to prevent or ordering a fresh round of escalation that risks deepening an already unpopular war with midterm elections looming in November or maintain the status quo and offers no face saving exit from a war he promised would be over by mid April.

US Jobless Claims edged up 1k to 199k vs 202k expected. Challenger planned layoffs dropped 27% to 33,429 in July. No signs of widespread AI driven job losses yet, with layoffs mostly confined to the tech sector. Productivity grew at a 1.4% annualised rate in Q2, well above the 0.6% expected, and unit labour costs rose just 1.3%.

St. Louis Fed President Musalem said overnight he wanted a 25bp hike at last week’s meeting – making him the 4th official to publicly break with the hold decision. His reasoning was blunt: earlier gradual increases are preferable to later abrupt ones, inflation expectations risk becoming unanchored and Fed should not keep policy easy just to chase productivity gains. Musalem said tolerating above target inflation on the promise of a future productivity windfall puts the Fed’s credibility at risk.

US Treasuries lower as yield rose with the oil prices. UST 2 and UST 10 year yield up 7 basis points to 4.25% and 4.68% respectively and 30 year yield up 6 basis point to 5.22%. VIX still at 15 handle.

In FX, USD strengthened with DXY up 0.3%. JPY lost 0.5% for the day. Market has been testing M*F/ BOJ for days and managed to break 158 on USDJPY yesterday and JPY has now given back nearly half its post intervention gains. EUR down 0.3%. Gold off the highs on higher yield and down 0.2% for the day. Silver dow 0.8%. Sees range trading ahead.

Key Levels
EURUSD - 1.1470/1.1500 | 1.1550/1.1580
GBPUSD - 1.3410/1.3430 | 1.3500/1.3540
USDJPY - 157.10/157.60 | 158.80/159.10
XAUUSD - 4134/4183 | 4303/4378
DXY - 99.10/99.50 | 100.00/100.30

For today, the main event is US Non Farm Payrolls. Consensus is 85k with unemployment holding at 4.2%. After the ADP miss at 44k, the Conference Board’s plunging “jobs plentiful” reading and ISM services employment contracting to 47.4, would think the risk is tilted to a soft print. A weak number gives Warsh breathing room to hold but it also confirms the labour market is softening. A strong number reopens the September hike door. 1 Fed speaker. Stay nimble.

Good luck and have a good day.

06/08/2026

Colours – 6 August 2026

Good morning,

Risk markets mixed overnight. S&P slipped 0.2%, Nasdaq down 0.8%, dragged lower by SpaceX’s 13.6% tumble and AMD’s 7% decline. SpaceX’s shares fell on AI capital expenditure concerns and with post IPO lock up expiry starting tonight, raising the spectre of further selling pressure. Meanwhile, Dow up 0.5% and closed at yet another record. The divergence between the Dow and the tech heavy Nasdaq spoke volumes about what the market is willing to pay for right now versus what it is starting to question AI expenditures and its ROI. Brent settled up 0.1% at $79.45 a barrel.

So this is what ‘’victory’’ looks like for Di**it Trump. After 5 months, ‘’god-knows-how-many’’ billions dollars spent, 18 dead Americans and a Strait that remains functionally closed, the proposed deal between Iran and Oman would give Iran control over ships entering the Gulf through the Hormuz. Iran’s Foreign Ministry confirmed that both sides had reached an understanding on the geographic coordinates of a shipping route, with a joint announcement reportedly in the final stages of drafting. But the details remain mudded with Iran seeking fees of 5–7% on cargo values, Oman says 3% and US wants no fees at all. Also, another sticking point is whether Iran also gets control of outbound traffic.

ADP private payrolls report showed just 44k jobs added vs 68k expected. US ISM non manufacturing PMI came in at 54.1 vs 54.5 expected. New orders jumped to 57.2 from 55.1, likely reflecting ongoing front loading by businesses seeking to avoid shortages and price increases from the Middle East disruption. and Prices paid continues to show inflationary pressure, climbed to 70.3 from 67.7.

US Treasuries continue the steady rise as the Middles East tensions de escalated and oil price continue lower. UST 2, UST 10 and UST 30 year yield down 1 basis point to 4.18%, 4.61% and 5.16% respectively. VIX at 15 handle.

In FX, USD lower with DXY down 0.2%. EUR gained 0.2%. USDJPY closed flat for the day with markets wary of intervention while also testing the upper end of USDJPY and the resolves of the authorities - like a teenager testing the boundaries of the teachers. Gold rocketed 4.1% on rumours that a BIG central bank is buying and institutional desks are front running the orders as well as buying ahead of NFP tomorrow. Silver up 4%. Nothing new to add, trade the range.

Key Levels
EURUSD - 1.1510/1.1530 | 1.1580/1.1630
GBPUSD - 1.3410/1.3430 | 1.3510/1.3560
USDJPY - 156.10/157.10 | 158.30/158.80
XAUUSD - 4122/4175 | 4375/4464
DXY - 99.00/99.40 | 99.90/100.10

The Hormuz negotiations remain the wild card. Every headline has the potential to whip oil, risk sentiments and USD in either direction and the market is clearly not positioned for a breakdown in talks. The underlying message is that the war premium is being rapidly unwound across asset classes but the peace premium has yet to be fully earned. That gap is where the risk sits. For today, we have US Jobless Claims, Preliminary Nonfarm Productivity, Preliminary Unit Labor Costs and Final Wholesale Inventories. SpaceX’s lock up expiry will be the dominant equity story tonight, with around $100b worth of pre IPO shares becoming eligible for sale. If selling pressure materialises, it could weigh not just on SpaceX but on the broader AI and tech complex. 1 Fed speaker tonight. Stay nimble.

Good luck and have a good day.

05/08/2026

Colours – 5 August 2026

Good morning,

US equities lift off and setting records. S&P closed at all time high, up 1.8%, Nasdaq up 2.6% and Dow hit a record for 2nd straight day, up 1.7%. 10 of 11 sectors rose. SOX up 1.9%. The market is risk on in a way that suggests either the war is ending or the war doesn’t matter. After the bell, SpaceX reported its first quarterly results since its landmark IPO, posting revenue of $7.8b against $4.1b a year earlier but capital expenditures ballooned to over $18b, with $15.8b poured into AI , up from $749m a year earlier. Shares fell 7.5%. Brent fell 5.3% to $79.58.

In the Middle East, Qatar said mediators were making progress in efforts to end the war, with Foreign Ministry spokesperson Majed al-Ansari describing contacts as having reached “very progressive stages”. Qatar, Pakistan and Oman are reportedly coordinating to facilitate negotiations and exchange draft proposals between US and Iran. Treasury Secretary Scott Bessent suggest a deal with Iran on reopening the Hormuz could be reached by Tuesday or Wednesday. Di**it Trump said talks with Iran had started and that Iran faced a “last chance”, though Iranian officials continued to insist no negotiations with US are taking place.

US JOLTS job openings fell to 7.36m vs 7.44m expected. Healthcare and social assistance vacancies posted their largest decline in 11 months. Leisure and hospitality openings fell by 86k, partly reflecting the fading boost from the recently concluded World Cup. On the other hand, hiring rose by 96k, layoffs remained low and ‘’quits rate’’ held steady at 2%. The picture is one of a labour market that remains stable but is gradually cooling.

US Treasuries higher on oil price collapse and mMiddle East de escalation hopes. UST 2 year yield down 5 basis points to 4.19%, UST 10 and UST 30 year yield down 6 basis points to 4.62% and 5.17% respectively. VIX at 16 handle.

In FX, USD weakened on lower yield, with DXY down 0.1%. EUR up 0.2%. Markets are testing M*F/ BOJ/ Fed’s resolves by pushing USDJPY higher with USDJPY up 0.4%. Gold gained 0.6% on lower yields and Silver up 2.3%. Feels that if peace prevails in the Middle East and oil prices continue to fall, pulling Treasury yields down from their highs, would think USD’s 2026 run is over. Meanwhile, trade the range.

Key Levels
EURUSD - 1.1470/1.1490 | 1.1570/1.1630
GBPUSD - 1.3370/1.3410 | 1.3510/1.3560
USDJPY - 156.10/157.10 | 158.60/159.40
XAUUSD - 4002/4042 | 4147/4213
DXY - 99.00/99.40 | 100.20/100.50

The market seems to be convinced of a peaceful resolution. But the gap between diplomatic optimism and operational reality in the Hormuz is wide open. S&P at all time high VIX at 16 handle reflects a market that has priced in a great deal of good news, but that also means that the pull back can be violent if things don’t go the way as expected. For today, we have European Service PMI, US ADP employment report and ISM Service PMI. 2 Fed speakers and Di**it Trump talking early tomorrow morning. Stay nimble.

Good luck and have a good day.

04/08/2026

Colours – 4 August 2026

Good morning,

Overnight, Di**it Trump said he is talking to Iran, except that Iran says it isn’t talking to anyone. In any case, Dow hit a record and oil dropped 7%. S&P up 1.5%, Nasdaq up 1.8% and Dow rose 1.3% to a fresh all time closing high. 8 of 11 sectors up. Amazon up another 4.6% to a $3T market cap for the first time. SpaceX jumped 5.6% ahead of its first ever earnings report tonight. Brent collapsed 7% to $83.77. The pattern repeats - TACO Trump announces massive attacks, cancels them, says talks are happening, oil crashes, stocks rip. This is now the umpteen times this cycle has played out since the war began. The market trades the headline, not the reality, and he makes Pelosi looking like an amateur.

Di**it Trump told reporters in the Oval Office that negotiations were “going on right now” and this was “a last chance” for Iran to sign a good deal. He posted on Truth Social calling Iran’s leadership “unbelievably duplicitous”. Iran’s foreign ministry said no negotiations were taking place and no meetings were scheduled. A senior Iranian source said the only discussions underway are between Iran and Oman over Hormuz transit routes.

US ISM manufacturing PMI came in at 55.6 vs 54 expected, the highest reading since May 2022. New orders climbed to 56.7 and employment rebounded to 52.8, marking the first expansion in almost 3 years. But I am not getting too optimistic with the headline number as I think it is driven by front loading of orders ahead of supply disruptions and AI capital expenditure boom.

US Treasuries higher across the curve, supported by the sharp drop in oil prices. UST 2 year yield down 2 basis points to 4.24%, UST 10 and UST 30 year yield up 4 basis points to 4.68% and 5.23% respectively. VIX down to 15 handle.

In FX, USD strengthened with DXY up 0.3%, more in part of market taking back some USDJPY shorts. EUR down 0.4%. JPY closed flat after a 1.7% (266 pips) intraday move with market selling USDJPY earlier in Tokyo session before taking back the shorts gradually over the day. Gold lost 0.4% and Silver up 1.1%. Spoke to some peers and one of them pointed out that the recent joint US/ Japan intervention allows M*F access to the Fed’s FIMA repo facility. This allows Japan to raise USD liquidity without selling US Treasuries. This is important because, if Japan starts to sell US Treasuries to fund its currency intervention, it will trigger a selloff in US debts, which will push Treasury yields higher, and that’s the last thing US need right now. Think M*F/ BOJ/ Fed’s actions (or inaction) over the next few days will be important as market will keep testing their resolve. So for now, would be looking to buy JPY on dips, else range trade for the rest of the currencies.

Key Levels
EURUSD - 1.1420/1.1470 | 1.1570/1.1630
GBPUSD - 1.3330/1.3390 | 1.3510/1.3560
USDJPY - 155.50/156.90 | 158.60/159.50
XAUUSD - 3969/3994 | 4090/4147
DXY - 98.90/99.40 | 100.20/100.50

Feels that the market is facing some fundamental tension. Equities are being carried by a spectacular earnings season and periodic bursts of optimism on Iran, but the underlying macro picture is far more complex. Inflation remains well above target, Fed is divided internally and the Middle East conflict shows no signs of genuine resolution regardless of what either side claims. Some analysts describe Iran’s approach as a calibrated endurance gambit – widening the conflict without triggering full scale war, turning trade routes, shipping lanes and energy infrastructure into pressure points that steadily raise the cost of confrontation. The goal is not military victory. It is to show US that containment is more expensive than accommodation. For today we have, US Trade Balance, Factory Orders and JOLTS Job Openings. SpaceX reports its first ever quarterly earnings today. Stay nimble.

Good luck and have a good day.

03/08/2026

Colours – 3 August 2026

Good morning,

The biggest JPY intervention in more than 15 years (as far as I can remember) last week and the market is still digesting it - with more JPY buying this morning. Japan M*F confirmed it conducted coordinated JPY buying intervention with US – the first joint US/Japan FX intervention in a long while. M*F and US Treasury bought JPY alongside and US Treasury informed banks on Friday through New York Fed that they should “stand ready for future action”. It was reported that NY Fed sold EUR for JPY through Goldman and Morgan Stanley. BOJ data suggests Japan may have sold as much as $59b on Thursday alone. Japan Finance Minister Katayama said the ministry “remains attentive and in close communication with counterparts at the US Treasury” and will not hesitate to act again. Kyodo reported the 2 countries may unveil a formal policy as early as this week, thus seems like the operation is “still ongoing”. The significance of this joint intervention cannot be overstated. When the M*F intervenes alone, the market treats it like a speed bump (M*F spent $73b in the April intervention and bought 6 weeks before USDJPY was back at pre intervention levels). When the US Treasury intervenes alongside Japan, the signal changes fundamentally. It tells the market that US considers JPY weakness is a problem serious enough.

Separately, BOJ kept rates unchanged on Friday as expected but warned that underlying inflation could exceed its target, signalling a rate hike could come as soon as September. If BOJ actually delivers a September hike and the M*F keeps the intervention threat credible, this could be the turn for JPY and JPY carry trades. We know from history that official intervention alone cannot permanently override underlying macroeconomic forces or interest rate differentials, so BOJ has to play ball here.

On Friday, US equities closed out a turbulent week on a constructive note. S&P rose 0.7%, Nasdaq up 0.6% and Dow up 0.5%. SOX edged up 0.1% on Friday but remains down over 20% from its June peak. Brent settled up 1.2% at $90.12 on Friday but prices cratered by nearly 5% this morning as TACO Di**it Trump announced that he called off a planned military strike on Iran to pursue immediate peace talks.

Late last night, TACO Di**it Trump said he cancelled a planned attack on Iran, conditional on being able to rapidly reach a deal. He cited requests from Iran and other Middle Eastern countries for time to complete an agreement that would lead to the immediate reopening of the Hormuz and an end to Iran’s nuclear ambitions. The announcement came followed a call with Saudi Crown Prince Mohammed bin Salman, who stressed the need for dialogue and de escalation. Di**it Trump said talks with Iran would take place but declined to set a deadline. Iran’s acting defence minister described recent US threats as psychological warfare but said Tehran would boost preparedness rather than remain passive.

US Treasury yield curve continues to steepen as short term yield fell as market unwind near term hike probability while pushing longer end to the highs. UST 2 year yield up 1 basis point to 4.26%, UST 10 and UST 30 year yield up 6 basis points to 4.72% and 5.27% respectively. VIX back down to 16 handle.

In FX, JPY intervention dominates the market. USD has weakened so far with DXY down 1.7% since last Thursday. EUR gained 0.9% since. Market continues JPY buying this morning with USDJPY down 260 pips at the day low. How this will pan out will depends on M*F/ BOJ/ Fed actions over the next few days. Gold lost 1.4% on higher yield and Silver down 2.1%. I will be very cautious with JPY and JPY crosses for now and would stay out of them. Trade the noise if you will but keep risk and positions very manageable.

Key Levels
EURUSD - 1.1420/1.1470 | 1.1580/1.1660
GBPUSD - 1.3320/1.3390 | 1.3530/1.3600
USDJPY - 153.00/155.00 | 157.50/159.30
XAUUSD - 3926/3972 | 4109/4163
DXY - 98.90/99.40 | 100.20/100.50

Other than watching JPY, we have to see what comes out of TACO Trump’s ‘’talk’’ with Iran. The headline act for this week is Non Farm Payrolls on Friday. Else, we have European Manufacturing PMI and US ISM Manufacturing PMI today, US Trade Balance, JOLTS Job Openings and Factory Orders tomorrow, European Services PMI, ADP Non Farm Employment Change and ISM Services PMI on Wednesday, US Jobless Claims on Thursday, China Trade Balance and US Non Farm Payrolls on Friday. We have 4 Fed speakers this week. On earning, we have Palantir, AMD and SpaceX this week. Stay nimble.

Good luck and have a good day.

31/07/2026

Colours – 31 July 2026

Good morning,

Well, well, BOJ/ M*F finally intervened last night, pushing USDJPY down almost 600 pips from 40 years high in a move (some say) coordinated with the Fed. Reports of "rate checks" by ‘’US authorities’’ amplified the impact of the intervention, catching a heavily short JPY positions completely off guard.

US equities roared back to life overnight. S&P climbed 1.7%, tech heavy Nasdaq surged 3.4% and Dow added 1.2%. S&P tech sector led the charge at 5.2% propelled by a stunning performance from Microsoft, where it added $450b in market value. SOX surged 8.2% with Micron up 18%, Sandisk up 26% and AMD gained 13%. After the bell, Amazon extended the rally, climbed nearly 9% in extended trading after reporting AWS revenue growth of 37% and raising its annual capital spending forecast by 10% to $220b, But free cash flow turned negative at $7.6b. Apple was the opposite story. Revenue and profits beat, iPhone sales hit record at $54.3b, Mac sales surged 29% but the current quarter forecast lagged Wall Street targets as Tim Cook flagged significant supply constraints from the advanced chipmaking bottleneck. Shares fell 6% after hours. Brent settled down 1.9% at $89.03.

The war expanded to Egypt. A drone strike damaged 2 gas tankers at Egypt’s port of Damietta. Egypt’s petroleum ministry confirmed the fire but made no mention of a drone. The attack raises an immediate question about the Suez Canal and Sumed pipeline, which is the last remaining northbound export route for Saudi crude that bypasses both Hormuz and the Bab el-Mandeb. Analysts warned that up to 5m barrels per day of oil supply currently bypassing Hormuz via the Mediterranean route could be put at risk.

US PCE Price Index rose 3.7% YoY, down from 4.1% in May, with MoM reading at 0.1% vs 0.2% expected and Core PCE eased to 3.3% from 3.4%. These numbers reflected the brief ceasefire that brought oil prices down and that truce has since collapsed. Brent is back hovering above $90 a barrel and average US gasoline prices have risen back above $4 a gallon. June’s inflation print is almost certainly the trough for this cycle. US Q2 GDP came in at 1.5% vs 2.1% expected. Consumer spending surged at a 3.2% rate but imports widened the trade deficit, taking away a full percentage point from growth. Business equipment spending rose 15.2% as AI buildout is pulling in imports faster than the economy can absorb them.

BoE left rates unchanged for the 5th consecutive meeting in a 6-3 (3 hawkish dissidents) vote from a previous 7-2 vote. The dovish/neutral majority is led by Governor Andrew Bailey whom focused on a more benign domestic picture. UK’s June CPI eased to 2.6% (down from 2.8% in May). Coupled with emerging slack in the UK labour market and cooling private sector wage growth. Market looked past the dissents with 2 year UK Gilts down about 12bps after the decision. GBP stable.

US Treasuries traded slightly bid. UST 2 year yield down 2 basis points to 4.25%, UST 10 year yield down 3 basis points to 4.66% and UST 30 year yield unchanged at 5.21%. VIX back down at 17 handle.

In FX, USD weakened, mostly weighted by BOJ/ M*F intervention, with DXY down 0.9%. JPY surged 3.4% at the high. The question is whether this move has legs. If BOJ delivers a hawkish signal today, JPY could extend its gains and put further pressure on the carry trade complex. But, if Ueda disappoints, would think that JPY retrace swiftly toward pre intervention levels, taking the cue from the pattern after April’s intervention. EUR up 0.6%. Gold up 0.8% and Silver gained 2.4%. Not the easiest condition to trade today and staying out of JPY today.

Key Levels
EURUSD - 1.1380/1.1440 | 1.1580/1.1660
GBPUSD - 1.3280/1.3350 | 1.3530/1.3600
USDJPY - 158.00/159.60 | 161.00/162.10
XAUUSD - 3968/4023 | 4165/4280
DXY - 99.50/99.90 | 100.90/101.60

BOJ rates decision later this morning with market expecting a hold. But Takata may dissent for a hike. Ueda’s presser will determine whether the intervention has the central bank support behind it and a hawkish signal matters. Tokyo core CPI accelerated in July and markets expect the BOJ to raise rates to 1.25% by year end. The intervention last night buys time and whether this intervention has legs will depends entirely on whether the BOJ follows through today. Else, we have China Manufacturing and Non Manufacturing PMI, European CPI, US Employment Cost Index, Uni of Michigan Consumer Sentiment and Inflation Expectations. Stay nimble.

Good luck and have a good day.

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