European FX Open - The carry trade is roaring back?

USD/YEN hit a new rebound high of 149.39 comeback high yesterday, thanks in part to a big beat in US retail sales of 1.0% m/m (vs a 0.4% consensus).

USD/YEN has dropped off a little since, but has maintained much of its recently acquired gains as the 2024 trend of shallow dip buying seems to have re-emerged. Interestingly, NOMURA INTERNATIONAL say the popular YEN-centered carry trade that blew up spectacularly two weeks ago appears to be creeping back. The Japanese firm have reportedly seen a variety of investors start borrowing the YEN gain to invest the proceeds elsewhere in higher-yielding assets.

AUD/USD is little changed at the start of the day after RBA governor Bullock stated the Bank remains some way off easing monetary policy, noting inflation is proving persistent and will only return back to the target range late next year.

NZD/USD, meanwhile, stands just above its psychological 0.6000 mark after RBNZ's Silk stated the MPC wants to see wage and price setting continue to decline as it decides the appropriate pace of future interest rate cuts.

And, USD/CNH stays south of 7.2000 this week after the PBOC governor pledged further steps to support economic recovery, while cautioning that it won’t be adopting 'drastic' measures.

Now, GBP/USD, which has made a new week's best of 1.2875 today following a series of first-tier UK data through the week, ie employment/wages, CPI and yesterday's as forecast GDP for June and Q2. At the top of the hour, we get retail sales, which are forecast to rebound 0.6% m/m in July vs the -1.2% read the previous month.

To complete the data week, we get the likes of EMU trade and in the second half Canada manufacturing sales and the Michigan sentiment and those long-term inflation expectations lead,

Fed's Goolsbe is a scheduled speaker.

In US politics, vice president and Democrat candidate for the presidency Harris will propose giving as much as Usd 25000 to first-time homeowners today and has reportedly agreed to a second debate with Trump in October.

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