EUROPEAN INFLATION: German Train Ticket Plans Would Add To Inflation Persistence

• Bearish dollar momentum continues to be a function of concerns related to the potential US government shutdown, which President Trump has said will probably occur. Haven demand for the Japanese yen has prompted USDJPY to fall another 0.5%, while a moderate hawkish tilt to the September RBA meeting promotes AUD to the top of the G10 leaderboard.
• USDJPY traded to a low of 147.66, with spot narrowing the gap to initial support which lies at 147.59, the 50-day EMA. Stronger pivot support has been defined at 145.49, the Sep 17 and post-Fed low.
• The broad dollar weakness has boosted AUDUSD back above the 0.66 handle on Tuesday. RBA Governor Michele Bullock declined to say whether the central bank retains an easing bias after the Board held the cash rate at 3.6%, stressing that future moves will depend on incoming data, with the current level still viewed as slightly restrictive.
• Overall, the AUDUSD uptrend remains intact and recent weakness appears to have been a correction. Initial firm resistance to watch at 0.6628 has been met today and will be closely monitored ahead of the APAC crossover. A stronger reversal higher would refocus attention on 0.6707, the Sep 17 and post-Fed high.
• Price action prompted another impressive surge for AUDNZD, rising to a fresh cycle high above 1.14, continuing to narrow the gap with the 2022 highs located at 1.1491.
• US data did little to spur volatility in currency markets. Job openings were relatively steady in August in the latest JOLTS report, but secondary metrics suggested further loosening in labor market conditions. Consumer confidence was weaker-than-expected.
• On Wednesday, the first focus will be on Japan’s Q3 Tankan Survey. Eurozone inflation data, US ADP employment and the ISM manufacturing PMI release are all scheduled.

Tuesday's Europe rates/bond options flow included:

• RXX5 125p, bought for 2 in 10k
• ERH6 98.0625/98.1875cs vs 97.875p, bought the cs for 1.25 in 7k total
• ERH6 98.25/98.12/98.06/97.81p condor, bought for 0.75 in 2k
• ERH6 98.00/98.06/98.12/98.18c condor, bought for 0.25 for 4k
• ERM6 98.37c, bought for 3.25 in 12k
• 0RX5 98.06c vs 0RV5 98.00c, bought the Nov for 1 and 1.25 in 10k Total.
• SFIZ5 95.95/96.25^^, bought for 2 in 2k
• SFIF6 96.25/96.15ps 1x2, bought for 1.5 in 1k.
• SFIZ6 96.25/96.75/97.00cfly vs SFIM6 96.00p x2, traded 7.75 for the fly in 2.5k

• Stocks are drifting in mildly negative territory after midday, apprehension over a looming US government shutdown at midnight tonight keeping trading accounts at bay.
• Currently, the DJIA trades down 22.74 points (-0.05%) at 46286.6, S&P E-Minis down 0.75 points (-0.01%) at 6711.5, Nasdaq down 27.6 points (-0.1%) at 22559.85.
• Energy, Financial and Consumer Discretionary sector shares led decliners in the first half, oil and gas stocks paring recent gains as crude prices retreated amid reports that ministers are considering a 500k b/d production increase at Sunday’s meeting. WTI crude recovered slightly (currently at 62.84 vs. 62.09 low) after OPEC issued a statement rejecting reports of production increases.
• Schlumberger -3.62%, Occidental Petroleum -2.66%, Halliburton -1.98%, Marathon Petroleum -1.89% and Phillips 66 -1.63% weighed on the Energy sector.
• A mix of financial services and travel related shares weighed on Financial and Consumer Discretionary sectors: Capital One Financial -5.82%, KKR & Co -4.67%, Synchrony Financial -4.54%, and MGM Resorts Int -4.41%, Expedia Group -3.60%, Las Vegas Sands -2.81% and Wynn Resorts -2.37%.
• On the positive side, Health Care and Information Technology sector shares led gainers. Pfizer climbed over 4% after headlines reported the pharmaceutical maker will get a three year grace period from Trump's drug tariffs. Merck & Co gained +4.00% and Charles River Labs +2.66%.
• Dell Technologies +3.36%, NVIDIA +2.85% and Super Micro Computer +2.55% supported the Tech sector.