German Ifo surges past forecasts, adding to evidence of a rebound in the eurozone's largest economy. All eyes on the U.S. PCE print due this afternoon.
Alpha Score of 67 reflects moderate overall profile with strong momentum, strong value, weak quality, moderate sentiment.
The euro edged higher after the German Ifo index beat expectations in August, adding to evidence of a rebound in the region's largest economy. The current assessment index rose to 88.5 from 86.6, its highest since 2024, while the expectations gauge climbed to 89.1, nearly back at pre-war levels. The data reinforced a narrative of manufacturing-led recovery as orders pick up and fiscal support filters through.
Across the Atlantic, the focus shifts to the July PCE inflation figures, the Federal Reserve's preferred measure, due in the afternoon. The June reading came in at 3.7% year-on-year, still well above the 2% target, with core inflation at 3.3%. A technical tweak to the calculation methodology by the Bureau of Economic Analysis is expected to shave roughly 0.2 percentage points off core PCE for the August release, complicating the near-term signal.
The dollar was broadly steady ahead of the data, with EUR/USD little changed as European rates declined in tandem with U.S. yields. USD/CAD continued its recent drift higher as trade tensions between the U.S. and Canada escalated further. Canada announced retaliatory tariffs of up to 50% on $20 billion of imports from the U.S., following Trump's plan to raise taxes on cars and auto parts from Canada. The measures appeared proportional and aimed at strengthening Canada's negotiating position, a person familiar with the matter said, but they add uncertainty for businesses on both sides of the border. The Trump administration is weighing additional measures against Canada, according to a person briefed on the discussions.
Oil prices extended their decline into a third session, with Brent crude falling toward $86 a barrel. Reports that Iran and Oman discussed establishing a temporary joint maritime corridor in the Strait of Hormuz weighed on prices, as did Washington's latest measures to intensify economic pressure on Iran, which proved less aggressive than markets had expected. The U.S. stopped short of imposing secondary sanctions on Iran's trading partners.
U.S. consumer confidence weakened further in August. The Conference Board's index fell to 89.4 from 90.8, below the consensus estimate of 91.2. The assessment of the current situation improved, while expectations for the future declined. Labour market perceptions strengthened, with more respondents viewing jobs as plentiful, though overall labour market sentiment remains on the weak side. Plans for major purchases were mixed, with intentions to buy cars and homes declining while planned vacations increased.
The VIX remained anchored around 15, where it has traded for some time, and many traders described the market as increasingly dull. Equities advanced across regions and most sectors, with the energy sector sliding 3% on the oil decline. Cyclicals continued to outperform defensives.
Minutes from the Riksbank's August meeting were more hawkish than the press release and monetary policy update suggested. The board is unanimous that the next step will be a rate hike, but the timing remains uncertain. Compared with the June meeting, members now see the economy and resource utilisation approaching normal levels, while the current policy stance is viewed as somewhat expansionary. Several members highlighted still-strong inflation momentum, which is expected to be a key focus ahead of the September meeting. The board appears more concerned about the outlook and more ready to act, but not in a hurry, a trader monitoring the analysis said. Unless inflation or price plans surprise on the upside, the first hike could be delayed from September to November.
In Sweden, producer prices for July are due this morning. PPI leads consumer prices by roughly three months, so the summer statistics provide signals about how inflation may develop in the autumn. In June, producer prices were unchanged month-on-month, but over the past year they have risen by more than 7%.
In Hungary, the central bank cut its benchmark rate by 25 basis points to 5.50%, the third consecutive quarter-point reduction. July inflation fell to a decade-low of around 1.2%, well below the bank's target, giving policymakers room to ease.
In Denmark, retail sales for July increased 1.3% month-on-month, the third consecutive monthly increase. The data points to strong private consumption growth, though from a low base. The average propensity to consume remains at a historically low level, leaving room for further expansion.
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