FED: US TSY 8W BILL AUCTION: HIGH 3.920%(ALLOT 2.93%)

• EUR/USD: Aug20 $1.1500(E3.3bln), $1.1550(E1.7bln); Aug21 $1.1500(E7.3bln), $1.1550-55(E1.8bln), $1.1595-00(E1.5bln); Aug24 $1.1450(E2.2bln), $1.1500(E1.1bln)
• USD/JPY: Aug20 Y158.00-10($1.1bln), Y160.00($1.6bln), Y162.40-50($1.3bln)
• EUR/JPY: Aug21 Y181.95(E1.1bln)
• NZD/USD: Aug20 $0.5740(N$1.3bln)
• USD/CAD: Aug21 C$1.4100-15($1.2bln)

German SME ('Mittelstand') revenue fell 2.0% Y/Y in July according to Datev data published by FAZ today (2.7% prior), supporting the narrative that a wider uptick in German economic conditions is not imminent following the marginally higher Q2 GDP.

• "After a positive trend until March, the upward movement has since reversed and turned negative [...] The economic situation remains challenging for many companies", Datev comments on longer-term trends.
• Across sectors: "While key sectors like construction and manufacturing experienced a sharp decline in revenue in July, sales in the hospitality industry were 5.9 percent higher than a year ago [...] The better performance in the hospitality sector could be due to the fact that, given the wars in the Middle East, more people are vacationing in Germany this year rather than abroad."
• More widely, German data has been mixed recently, with Q2 GDP surprising marginally to the upside at 0.2% Q/Q in the flash release but a broad-based uptick in momentum is not apparent at the current juncture, a narrative supported by the Datev SME data. Following a slightly stronger ZEW index today, key German sentiment data is scheduled for this Friday (flash PMIs) and Monday (IFO). Q2 GDP details are also scheduled for Monday.

From the WaPo piece:

• "The Pentagon is evaluating its military footprint in the Middle East in an early sign of the Iran war's potential to transform the U.S. presence in the region, according to eight people, including officials and others familiar with the matter."
• "One of the key areas the Defense Department is assessing is whether to pull back troops from the Persian Gulf, where America's large overseas military bases have been battered by months of Iranian strikes, two people familiar with the ongoing analysis said."
• "Allies in the Gulf have for decades depended on U.S. forces for their defense. Any regional drawdown could leave states unable to defend themselves against Iranian attacks. Investing in domestic capabilities or partnering with other powers to offset the shortfall could take months to years."