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Markets:

  • Gold flat at $1912
  • US 10-year yields up 8.8 bps to 4.17%
  • WTI crude oil up 35-cents to $83.17
  • S&P 500 flat
  • GBP leads, NZD lags

The final changes on the day and the headlines don’t capture what was a lively August Friday. The PPI numbers hit and were slightly stronger than expected. Normally that wouldn’t cause much of a ripple but bonds spilled lower, pushing yields 5-6 bps higher and that reverberated into risk aversion and US dollar buying.

Commodity currencies sank, and EUR/USD fell with all pairs moving 20-30 pips in short order. Even with the risk aversion, USD/JPY continued to climb and touched 145.00 but couldn’t break through the June high of 145.07. Still the close finish puts that number squarely in the sights of the market for next week.

Cable outperformed today but it underperformed yesterday and that might just be a wash. The main thrust was in the US dollar but the loonie hung right with it as oil prices rebounded from European selling to finish higher and natural gas was slightly stronger as well. Gasoline and diesel prices are increasingly the tail that is wagging the dog and also rattling broader inflation expectations.

Treasury yields finished near the highs of the day and not far from last week’s highs as steepeners continued on hopes for a soft landing.

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