North American FX Open - EURO shrugs off latest German shock for now

Ahead of the start of the day, latest US data surprised to the topside.

The NFIB small business optimism came in at 93.7 in July vs a 91.5 consensus and last.

Main event ahead though is likely to be the pre-CPI PPI release for July. Final demand is seen slowing to 2.3% y/y vs 2.6% the month previous.

Month-on-month wise, two 0.2% numbers are expected though there is a suggestion that components that feed into the Fed’s preferred inflation measure, the core PCE deflator, are expected to show that measure could be back on the rise, to 0.23% vs 0.18% last.

The USD looks to be in consolidation mode ahead, probably until Wednesday's big one for the week US CPI.

We do not expect current ranges to be much tested today unless the data really surprises.

On the central bank front, Fed's Bostic speaks on the economy later. In late June, Bostic tipped a rate cut in Q4, unchanged from his March view.

Overnight, the big one was the German ZEW for August, which proved a big miss. Investor confidence plunged to its lowest level since January, with the expectations gauge coming in at 19.2 vs a 34.0 forecast and 41.8 last. The ZEW president remarked the economic outlook for Germany is breaking down!

EUR/USD though is little changed.

GBP generally opens a touch firmer in the wake of the UK unemployment rate falling to 4.2% from 4.4% and a semi-spike in the employment change of 97k vs a 3k consensus though an area of the AWE missed expectations at 4.5% y/y vs a 4.6% forecast and 5.7% last.

In Asia, the Australia Q2 wage price index came in unchanged at 4.1% y/y vs a 4.0% consensus. AUD/USD is little changed after, just south of 0.6600, suggesting markets acknowledge wage growth remains elevated and an RBA interest rate cut cycle is still a long way off. And, Japan PPI just missed expectations, but rose to 3.0% y/y vs 2.9% last, marking six consecutive months of acceleration as the end of utility subsidies drove up energy costs and it seems another BOJ rate hike before year-end cannot be ruled out.

US stock futures have pared gains amid ongoing geopolitical worries. BBC News report Zelensky says 'war is coming home' to Russia as Ukraine continues offensive, while the market worries an Iran attack on Israel could be imminent. Axios report US Secretary of State Blinken is scheduled to travel to the Middle East tonight and Israel was downgraded by Fitch.

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