EMISSIONS: German EU ETS Clears Higher, Weaker Participation

The Riksbank’s press conference has started. Governor Thedeen re-iterates that the outlook is broadly unchanged relative to June, explaining the “exactly unchanged” guidance.

• The EU-US trade deal is quite important: It has led to somewhat lower uncertainty in the system, but uncertainty still remains and is having an impact.
• Link (in Swedish) here.

• UK inflation data came in hotter-than-expected, with an outsized contribution from services inflation helping boost the headline print to 3.8%. This leaves the UK with one of the highest core rates of inflation in the G10, and while much of the pressure stemmed from seasonality (airfares in particular), it still relieves pressure on the MPC to lean further on this year's easing cycle. That said, market moves have been generally contained. Year-end SONIA pricing factored out around 1bps of BoE rate cuts (now at ~12bps), and pressured EUR/GBP to daily lows of 0.8609 as a result.
• NZD slips against all others in G10 on the RBNZ rate decision for August. The bank cut rates by 25bps, but more importantly triggered NZD sales by signalling deeper rate cut below neutral - pressing markets to price in a greater likelihood of 50bps of further cuts into year-end. NZD/USD made light work of the 0.5833 200-dma support in the initial reaction, having already cleared 0.5847. 0.5803 marks the next downside level: the 50% retracement for the rally off the April low.
• The USD Index has crept to a new weekly high at 98.441 despite the GBP rally. Prices continue to edge higher as markets appear to be adopting a more neutral position headed into Friday's Jackson Hole appearance from Chair Powell. Despite Trump's renewed criticism of Powell's approach to policy overnight (this time, Trump highlighted the issues for the housing market from high rates), there remains a risk that Powell pushes against the urgency of easing in September - any suggestion of which would work against the 21bps of cuts currently priced, and favour the dollar.
• Fed minutes due Wednesday will be carefully watched for the conversation around rates and, in particular, any clues as to whether further FOMC members came close to dissenting alongside Bowman and Waller at the most recent rate decision. While today's Fed release will be of importance, it's Powell's appearance at Jackson Hole on Friday that'll likely be of more market interest. 

• MNI: EUROZONE JUL FINAL HICP +0% M/M, +2% Y/Y
• EUROZONE JUL FINAL CORE HICP -0.2% M/M, +2.3% Y/Y
• EUROZONE JUL FINAL SERVICES HICP +1.1% M/M, +3.2% Y/Y