Currencies were range-bound overnight ahead of today’s critical US CPI report. The DXY Index held mostly below 100 in August, down from a 100.3-101.8 range from late June into July. The market believed the joint US-Japan FX interventions to pull USD/JPY below 160 were also targeted at stabilizing US long bond yields. Last Friday’s negative US nonfarm payrolls did not help the USD bulls’ case for a Fed hike before the November US midterm elections.
The futures market is pricing in a less than 50% chance of a September Fed hike into today’s CPI data. Although headline inflation is expected to turn positive from -0.4% MoM in June, the 0.1% MoM increase in July is well below the 0.5-0.9% prints in March-May. The 0.2% MoM increase expected in July’s core inflation from 0% in June is around the same averages seen for 1H26 and the whole of 2025.
If CPI disappoints today, speculators will likely trim their long USD positions against the NZD, EUR, and JPY, the currencies with the best market bets for a September hike. Despite a less than 25% chance of a hike by the Bank of England, Reserve Bank of Australia, and Bank of Canada, GBP/USD and AUD/USD have recovered, rising above their pivotal levels at 1.34 and 0.70, respectively, while USD/CAD sank below 1.40 for the first time in two months.
Markets were also more desensitized to Middle East tensions as long as Brent crude is seen consolidating below $100 per barrel, amid the CNY, KRW, and GBP appreciating past their Operation Epic Fury levels.
Quote of the Day
“Kites rise highest against the wind - not with it.”
Winston Churchill
August 12 in history
In 1898, the US and Spain signed an armistice, ending the Spanish-American War. The US acquired Puerto Rico, Guam, and purchased the Philippines for $20 million, marking its rise as a global power.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
[1] This disclaimer may not apply if the applicable assets fall within the definition of 'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.