North American FX Open - Usd starts the Fed week with a tentative bid tone

A tentative overnight Usd bid tone has taken the Dollar Index close to recent highs, but as the month comes to a close this week it is the traditional safe havens of the Yen and the Franc that have been July's best two G10 FX performers.

This shows what a month it has been, with markets now more concerned with the growth outlook than by near term inflation developments.

Over the weekend it was reported that Chinese industrial profits rose by 3.6% y/y in June, compared to the increase of 0.7% in May. However Citi revised down their Chinese 2024 GDP forecast to 4.8% y/y from their prior 5% estimate, due to Q2's miss.

US equity market futures are all in positive territory as we start the Fed week, after Donald Trump said he would fire SEC Chair Gensler if he returns to the White House in favor of a digital currency-friendly regulator, vowing to make the US the "world's crypto capital."

US big-tech earnings updates will be a major focus this week, with Microsoft due tomorrow, Meta on Wednesday and Apple and Amazon on Thursday. Bbg reported that Apple is taking longer than expected to include its recently unveiled artificial intelligence features, known as Apple Intelligence, into its flagship iPhone and iPad devices, and they will not be included in an initial software update

Meanwhile, US Treasury Secretary Yellen rejected Trump's argument that a strong USD is walloping US manufacturers, saying it’s just not that simple and the overall labor market is solid.

BBC News reported that the UK chancellor is set to announce immediate cuts worth billions of pounds, aimed at plugging a Gbp 20bln black hole in the finances, when she addresses Parliament today. Rachel Reeves' plans are expected to include the cancellation of some road and rail projects, a reduction in spending on external consultants and a drive to cut public sector waste.

The UK savings rate in Q1 hit 11.1%, compared with 6.6% in Q2 2022, which suggests that UK household finances are in decent shape, although consumer spending has been relatively cautious. Rate cuts could release savings onto the spending side of the equation and there looks plenty of funds to support the consumer.

Expectations for a Bank of England rate cut on Thursday continue to rise, with now almost 20bps worth of easing implied.

This has weighed on the Pound, which has seen Eur/Gbp rise to 0.8461, its highest level since July 5th.

Swedish flash Q2 GDP was a major disappointment falling by 0.8% q/q compared to the flat forecast.

For today, the Dallas Fed manufacturing report for July is the only data of note.

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