US TSYS: Hawkish Reaction to Flood of Economic Data

The Dallas Fed's Texas Service Sector Outlook survey showed continued improvement in activity and forward looking sentiment in August - alongside higher price pressures and, potentially, weakening margins.

• The current general activity index rose to 6.8 from 2.0 prior, for the best reading in 7 months. The 6-month outlook rose to 10.7 from 9.8, for a 6-month high. And the revenue index, per the report "a key measure of state service sector conditions", rose to 8.6 from 6.3. In other activity findings, there was "flat employment and a modest increase in hours".
• Inflation remained an issue, however: current prices paid ticked up to 27.9 from 25.3 prior, marking a 4-month high, while prices received fell to 2.7 from 3.3, a 9-month low. That differential is the widest in 18 months, potentially suggestive of margin pressures / lack of ability to pass through higher costs to clients.
• Within the overall services sector, the retail sector showed a decline in August, though expectations for future activity improved.
• Overall the region appears to be seeing improving economic activity, albeit alongside firmer price pressures, with the Dallas Fed manufacturing report showing similar.

The dollar dips slightly as President Trump appears to suggest in a cabinet meeting press conference that the administration could nominate Stephen Miran to "fired" Governor Cook's Board position (expiring in 2038), instead of ex-Gov Kugler's vacant spot (whose term ends in January before requiring renewal). He also makes it clear the he is looking to have a "majority" on the Fed Board "very shortly", with the aim to bring down interest rates:

• "We have we just put a very good man in that in one position. We might switch him to the other... longer term and pick somebody else. But we're very happy with the person we have in there, and we'll have a majority very shortly. So that'll be great. Once we have a majority. And housing is going to swing and it's going to be great. People are paying too high an interest rate. That's the only problem with housing. We have to get the rates down a little bit. And when we do, it's going to be a tremendous difference."
• Re Cook's replacement: "We have some very good people for that position, and I think we have some very good people we’re down to." As for her challenging being "fired", Trump says that Cook "seems to have had a refraction" and says that he is prepared for a legal fight.

• Crude came under pressure on Tuesday, fully unwinding Monday’s gains, as oil markets remain focussed on Russian oil supply amid laboured peace efforts.
• WTI Oct 25 is down by 2.4% at $63.3/bbl.
• On the bearish side, Trump’s 50% tariffs on India for buying Russian oil come into effect on Wednesday while Indian buying shows signs of resuming.
• Crude arrivals into India will likely increase in September and October, driven by higher inflows of Russian crude, Vortexa reports. This could signal that secondary Russian oil sanctions may do little to dent buying.
• A bear cycle in WTI futures remains intact, with initial support at $61.29, the Aug 13 low, which was recently pierced. A continuation lower would open $57.71, the May 30 low.
• Key short-term resistance has been defined at $69.36, the Jul 30 high.
• Meanwhile, spot gold has risen by 0.5% to $3,384/oz, taking total gains from last week’s low to over 2%.
• The move comes amid a further dip in the US dollar today, following headlines surrounding the uncertain future of Fed Governor Lisa Cook.
• The medium-term trend condition in gold remains bullish and moving average studies remain in a bull-mode position, highlighting a dominant uptrend.
• The sideways direction that has been in place since the April peak appears to be a pause in the uptrend. A continuation of gains would open $3,439.0, the Aug 23 high.