European FX Open - CPI reports dominate the day

NZD/USD peaks for now at the latest lower top of 0.6082-84 and backs off smartly.

Low so far today is 0.6004 after the RBNZ semi-surprised by deciding to cut interest rates, by -25BPs to 5.25%.

The Bank said NZ annual CPI is returning to within its 1-3% target band,. The pace of further easing will depend on the Bank's confidence that pricing behavior remains consistent with a low inflation environment, and that inflation expectations are anchored around the 2% target. The RBNZ’s new forecasts show the average OCR falling to 4.92% in Q4 and to 4.36% by mid-2025.

Note RBNZ governor Orr stated that a -50BPs move was considered.

Does Kiwi now make a sustained sub-0.6000 return in response?

Moving swiftly on and to some big CPI releases ahead.

First, at the top of the hour, comes Sweden and UK CPI for July. Perhaps greater focus will be on the former after the BOE began its interest rate easing cycle earlier this month though many participants are already betting the Riksbank resumes rate cutting on the 20th.

Swedish CPIF inflation is tipped to rise 1.6% y/y vs 1.3% last though it is still tipped to come in south of the central bank's 1.8% forecast from June.

UK CPI is tipped to rise 2.3% y/y vs 2.0% last though the well watched services version is seen slowing a touch at 5.5% vs 5.7%.

French CPI as well as EMU GDP, employment and IP come through the remainder of the morning.

The second half is dominated by US CPI, which is seen unchanged at 3.0% y/y in July, with both m/m measures tipped at 0.2%. Ahead, Fed's Bostic said he’s looking for more data before supporting a move. The USD is set to move on any material surprises, as EUR/USD starts the day just south of the psychological 1.1000 mark.

Goldman Sachs reportedly state US recession odds are rising, with financial markets assigning a 41% probability vs 29% in April.

Elsewhere, oil firms above Usd 80/brl as the API said US crude stockpiles fell by 5.2mln barrels last week after a big drop at Cushing.

Meanwhile, Bbg reports Japan PM Kishida won’t run for a second term as leader of the long-ruling LDP in September, opening the door for a new party member to take over the post of premier.

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