EXECUTIVE SUMMARY
- TRUDEAU TO FACE MORE PRESSURE TO LEAVE AFTER MONTREAL DEFEAT
- HARRIS LEADS TRUMP 49%-46% IN PENNSYLVANIA - USA TODAY POLL
- BLINKEN TO MAKE 10TH TRIP TO MIDEAST FOR ELUSIVE GAZA CEASE-FIRE
- ECB’S SIMKUS SAYS LIKELIHOOD OF OCTOBER RATE CUT IS ‘VERY SMALL’
Figure 1: DXY approaches 14-month low ahead of Wednesday FOMC
Source: MNI/Bloomberg
NEWS
MNI FED PREVIEW - SEPTEMBER 2024: “Close Call” Tilts to 50bp Cut
Fed leadership has made it abundantly clear that the FOMC will initiate a rate cutting cycle at the September meeting, with pre-blackout developments pointing toward a 25bp reduction as opposed to an outsized 50bp. But subsequent media reports that it’s a “close call” have pushed market pricing to imply a split decision vs a 50bp cut, and to MNI’s Markets Team, it suddenly looks more likely than not that Chair Powell will persuade the FOMC to opt for a slightly more front-loaded cutting cycle. The apparent last-minute indecision underlines uncertainty over how the Committee currently sees the likely extent and pace of cuts, beyond “data dependent”, as it assesses what it sees as a shifting balance of risks between rising unemployment and above-target inflation.
US (BBG): Harris Leads Trump 49%-46% in Pennsylvania: USA Today Poll
Democratic presidential nominee Kamala Harris leads Republican opponent Donald Trump 49% to 46% in Pennsylvania, according to USA Today/Suffolk University polls conducted after the presidential debate. Statewide poll of 500 likely Pennsylvania voters was conducted from Sept. 11-15. Margin of error of 4.4 percentage points.
US (BBG): Trump Unveils Crypto Project, Says US Should Dominate Sector
Donald Trump headlined an event billed as the unveiling of a crypto platform promoted by the Republican nominee and his sons, putting the spotlight on a niche sector of digital assets with a history of controversy. The project, World Liberty Financial, will be part of the decentralized finance segment of digital assets and is supposed to help with financial security and being able to transact freely, Trump’s son Donald Jr. said in an X Spaces livestream on Monday.
US/MIDEAST (BBG): Blinken to Make 10th Trip to Mideast for Elusive Gaza Cease-Fire
Secretary of State Antony Blinken plans to embark on his 10th trip to the Middle East since the Israel-Hamas war began almost a year ago, as the Biden administration continues efforts to revive the stalled cease-fire talks as the US elections approach. The top US diplomat will fly to Cairo to discuss the negotiations for a cease-fire in Gaza and broader regional security issues, as well as for talks with Egyptian officials, State Department spokesman Matthew Miller said Monday.
US/HONG KONG (BBG): HK Leader Warns US Companies Will Suffer If Trade Offices Shut
Hong Kong’s leader warned that American businesses will suffer if Washington adopts a bill to shut the city’s US trade offices, as the financial hub’s relationship frays with the world’s largest economy. Chief Executive John Lee on Tuesday repeated China’s threat of retaliation if the US pushes ahead with an act that would close the city’s three Economic and Trade Offices in America. The US could take such action if it no longer deems the former British colony sufficiently autonomous from China.
US (BBG): US Troops No Longer Needed Following ISIS Defeat, Iraqi PM Says
Iraq’s prime minister said US troops are no longer needed in his country because they have largely succeeded in vanquishing ISIS, and he plans to announce a timetable for their withdrawal soon. The US has about 2,500 military personnel in Iraq, a legacy of an American-led coalition formed in 2014 to combat the Islamist group widely known as ISIS. While the organization is much weaker than a decade ago - when it held major cities and provinces in Iraq and Syria and shocked the world by posting beheadings online - its fighters still operate in both nations.
CANADA (BBG): Trudeau to Face More Pressure to Leave After Montreal Defeat
Canadian Prime Minister Justin Trudeau suffered a big political setback as his Liberal Party lost a special election in a Montreal district that until recently had been considered safe ground for him. The defeat will raise the pressure on the 52-year-old leader to step aside before the next election, which is scheduled for October 2025 but may happen earlier than that. It’s the second significant defeat at the ballot box in just a few months for his party. In June, voters elected a Conservative Party candidate to represent an area of Toronto that had previously been a Liberal stronghold. Now they’ve rejected the Liberals again in the electoral district of LaSalle-Emard-Verdun in Montreal, Trudeau’s hometown.
ECB (BBG): ECB’s Simkus Says Likelihood of October Rate Cut Is ‘Very Small’
There’s little chance that the European Central Bank will lower interest rates again next month, according to Governing Council member Gediminas Simkus. While officials want to maintain flexibility and to continue to make data-driven decisions, another reduction in the deposit rate so soon after this month’s quarter-point cut would be “hard,” the Lithuanian official said Tuesday. “It’s natural that the likelihood of October reduction is very small,” he told reporters in Vilnius. “It’s questionable if there’s a need for this. The euro-area economy is developing according to our forecasts and that’s been the story of the past two years.”
EUROPE (BBG): Rising Floodwaters Leave Europe Bracing for More Destruction
Water levels on the River Danube rose further, as deadly floods unleashed destruction across central Europe. The torrential rain from Storm Boris is set to subside on Tuesday but water levels remain elevated across the region. In Austria, the focus is turning to the threat posed by melting snow and landslides, after the slow-moving cold weather system brought heavy falls over the weekend to the eastern Alps. Czech authorities are monitoring the risk to the northern city of Ostrava, along with southern parts of the country, while red flood alerts are also in place for Hungary and Slovakia. In Poland, the city of Wroclaw may be threatened later this week by the swollen rivers.
MNI UK INFLATION PREVIEW: August 2024
The August inflation print will have already been seen by the MPC - under the early access agreement they had been given the Monday morning. The report follows a big downside miss in the July data - with the largest driver by far much softer-than-expected accommodation prices. The lowest sellside estimate for services CPI in the previews that we have read came in at 5.38%, over two tenths above the 5.17%Y/Y print seen in July. The median of the previews that we have read came in at 5.5%Y/Y (with the mean at 5.55%, the Bloomberg median was a little higher at 5.6%). The highest estimates in the previews that we read of 5.7%Y/Y were all, however, still below the BOE's 5.84%Y/Y forecast (from its August MPR).
UK (BBG): Starmer Says He Won’t Hurt Economic Growth With UK Budget Plans
UK Prime Minister Keir Starmer said he’ll prioritize economic growth in the government’s upcoming Budget, despite concerns from business that a looming package of tax hikes and spending cuts could stymie the British economy. “The No. 1 priority of this government is economic growth and all decisions will be made against that objective,” Starmer said to reporters as he flew back from meeting Italian Premier Giorgia Meloni in Rome on Monday. “If it promotes economic growth, it’s in the ‘Yes’ column, if it is inhibiting growth it’s in the ‘No’ column.”
GERMANY (MNI): CDU's Merz Could Be Put Forward as CDU-CSU Candidate in 1200CET Presser
Leader of the main opposition centre-right Christian Democratic Union (CDU) Friedrich Merz will hold a presser at 1200CET (0600ET, 1100BST) alongside Markus Soeder, Minister-President of Bavaria and leader of the CDU's sister party in that state, the Christian Social Union (CSU). This hastily-arranged news conference could see Merz recommended by Soeder to serve as the candidate for the 'Union' (what the joint CDU-CSU pact is called in elections) in the next federal election due in just over a year on 28 Sep 2025.
GERMANY (MNI): Delay of Intel Investment Subsidized With E9.9b Shouldn't Impact Issuance
A two-year delay of Intel's ~E30bln investment plans in eastern Germany (Magdeburg), which was planned to be subsidized with around E9.9bln by the federal government appears rather unlikely to have effects on 2024/25 federal net issuance plans. This comes as the 2024/25 budgets are very tightly calculated and there is still a financing gap for 2025 (likely mid-single digits Ebln). It therefore appears plausible that debt brake net issuance limits will get exhausted irrespective of the announcement. German net issuance is currently planned at E50.3bln in 2024 and E51.3bln in 2025 (note that Q4-24 issuance plans are due to be confirmed tomorrow).
EU COMMISSION (MNI): VdL Unveils New Commissioners & Portfolio Distribution
European Commission President Ursula von der Leyen is unveiling her new College of Commissioners and the distribution of portfolios between the 26 commissioners. VdL says that the new Commission "will focus on prosperity, security, democracy against backdrop of needed competitiveness for green transition and digitalisation". VdL: "Commission needs to enhance cohesion in the EU".
JAPAN (BBG): Latest Polls Suggest Japan Leadership Race Is a Three-Way Tussle
The race to become Japan’s next prime minister appears to be shaping up as a three-way battle among candidates with divergent policy views, according to the latest polling data. Sanae Takaichi, a supporter of fiscal and monetary tools to stimulate the economy, has new momentum, while Shinjiro Koizumi, an advocate of deregulation, has given up some ground, the surveys suggest. Shigeru Ishiba, who has emphasized regional revitalization, remains popular among the ruling Liberal Democratic Party’s rank-and-file.
RUSSIA/N. KOREA (BBG): North Korea Sends Top Envoy to Russia as It Girds for Friction
North Korea sent its foreign minister to Russia for her second trip in less than a year to the major backer of Kim Jong Un’s regime. The move comes as Pyongyang readies for a parliamentary meeting that will likely approve measures that raise tensions with South Korea. Choe Son Hui led a delegation taking part in women’s conferences, the official Korean Central News Agency reported Tuesday in a two-sentence dispatch.
DATA
GERMANY ZEW SEP ECONOMIC EXPECTATIONS 3.6 (MNI)
GERMANY SEP ZEW CURRENT CONDITIONS -84.5 (MNI)
FOREX: USD Index at Session Lows, Approaches 14-Month Low
- The greenback has resumed its weakening trend on Tuesday and the USD index is testing the week’s lows as we approach the NY crossover. The ongoing tilt towards a 50BP FOMC cut is weighing and despite the contained ranges across G10, the DXY is hovering just above 100.50, which would be the lowest level since July 2023.
- AUDUSD is the relative outperformer, rising 0.16% and making an attempt at 0.6767, the August US NFP high. Above here, markets will turn their focus to 0.6824, the August high, and the highest printed level since January.
- In similar vein, EURUSD is also edging towards key short-term resistance at 1.1155, the Sep 6 high. Clearance of this level would cancel a recent bearish theme and highlight scope for a stronger recovery towards 1.1202, the Aug 26 high and a bull trigger.
- GBPUSD is further extending its recovery from 130.00 and is within close proximity of the September peak at 1.3238 as we approach both UK inflation data tomorrow and the BOE decision Thursday. An extension to 1.3266, the August high, would see Cable once again at its highest level since 4th March 2022.
- USDJPY resides close to unchanged on the session, despite exhibiting a 90 pip range overnight. USDCHF (-0.15%) hovers at session low and the main support here is at the September low of 0.8375, also the lowest print since December.
- Canada inflation data and US retail sales headline the economic calendar for the remainder of the session.
EGBS: Bunds Off Highs, Fed Speculation Remains Dominant
Bund futures reached an intraday high of 135.39 before fading, now +23 ticks today at 135.27. First resistance is 135.49 (Sep 11 high), which shields the bull trigger at 135.66 (Aug 5 high).
- Speculation around whether the Fed will deliver a 25bp or 50bp rate cut tomorrow remains the dominant theme across global markets.
- The German September ZEW survey was weaker than expected on both the expectations and current conditions metrics, but did not move markets (the ZEW is an investor-based survey, so provides limited insight into actual economic conditions).
- The German cash curve has lightly bull flattened, with yields 1 to 2.5bps lower.
- European equity futures are 0.7% higher today, allowing the 10-year BTP/Bund to spread to trade below 135bps – its tightest in almost a month.
- The 10-year OAT/Bund spread has widened 1bp, now back at 72bps after briefly falling below 70bps last week.
- Broader macro focus turns to the US retail sales and industrial production reports this afternoon.
GILTS: Remaining Underpinned
Core global FI markets continue to adjust to increased odds of a 50bp cut from the Fed, underpinning bonds
- Gilt futures last 101.50 after peaking at 101.53.
- The technical set up is still bullish with the Sep 12 high (101.51) pierced. Any fresh extensions higher are set to target a Fibonacci projection (101.78).
- Yields 1.5-2.5bp lower on the day, light bull steepening.
- 30-Year supply saw a wide tail, although a very healthy average price vs. prevailing mids at the bidding cut off time limited any market feedthrough.
- Curve marginally steeper since the auction.
- SONIA futures little changed to +2.5.
- Event risk picks up over the next 48 hours or so, with U.S. retail sales, UK CPI the FOMC and BoE decision all due.
- BoE-dated OIS shows ~5bp of cuts for Thursday, ~53bp of easing through year-end and ~142bp of cuts through June ’25.
EQUITIES: Bear Threat in Eurostoxx 50 Futures Still Present Despite Latest Gains
Eurostoxx 50 futures are holding on to their recent gains. Despite the latest recovery, a bear threat is still present. The sell-off between Sep 3 - 6, resulted in a move below both the 20- and 50-day EMAs. A resumption of the bear leg would signal scope for weakness towards 4686.53, a Fibonacci retracement point. First resistance is at 4863.45, the 50-day EMA. A clear break of this average would strengthen a bullish condition. Last week’s recovery in S&P E-Minis, highlights a bullish reversal and the end of the Sep 3 - 6 corrective cycle. The contract is trading above the 20- and 50-day EMAs and a continuation higher would open 5730.50, the Sep 3 high. Clearance of this level would expose 5785.00, the Jul 16 high and bull trigger. A reversal lower and a breach of 5451.25, the Sep 6 low, would reinstate a bearish theme. First support is 5583.10, the 50-day EMA.
- Japan's NIKKEI closed lower by 378.54 pts or -1.03% at 36203.22 and the TOPIX ended 15.38 pts lower or -0.6% at 2555.76.
- Across Europe, Germany's DAX trades higher by 58.62 pts or +0.31% at 18692.3, FTSE 100 higher by 60.86 pts or +0.74% at 8339.44, CAC 40 up 34.77 pts or +0.47% at 7484.21 and Euro Stoxx 50 up 21.41 pts or +0.44% at 4849.04.
- Dow Jones mini up 71 pts or +0.17% at 41731, S&P 500 mini up 13.25 pts or +0.24% at 5651.5, NASDAQ mini up 72.25 pts or +0.37% at 19505.25.
Time: 09:50 BST
COMMODITIES: Bullish Structure in Gold Intact After Hitting Fresh Record High
WTI futures are holding on to their latest gains. The move higher that started Sep 9, appears to be a correction. Recent weakness reinforced a bearish condition and note that moving average studies are in a bear-mode set-up, highlighting a dominant downtrend. A resumption of the downtrend would open $63.93 next, a Fibonacci projection point. Initial firm resistance to watch is at $70.97, the 20-day EMA. A bullish structure in Gold remains intact and the metal traded, once again, to a fresh all-time high, yesterday. Last week’s gains confirmed a resumption of the primary uptrend and marked the end of the recent period of consolidation - a pause in the uptrend. Moving average studies are in a bull-mode set-up, highlighting a clear uptrend and positive market sentiment. The focus is on $2600.0 next. Firm support lies at $2515.5, the 20-day EMA.
- WTI Crude up $0.12 or +0.17% at $70.21
- Natural Gas up $0.01 or +0.3% at $2.381
- Gold spot down $3.94 or -0.15% at $2578.6
- Copper up $1.3 or +0.3% at $428.7
- Silver up $0.02 or +0.06% at $30.747
- Platinum down $4.3 or -0.44% at $983.26
Time: 09:50 BST
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 17/09/2024 | 1215/0815 | ** |  CA | CMHC Housing Starts |
| 17/09/2024 | 1230/0830 | *** | CA | CPI |
| 17/09/2024 | 1230/0830 | *** |  US | Retail Sales |
| 17/09/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 17/09/2024 | 1300/1500 |  EU | ECB's Elderson in supervisory effectiveness panel | |
| 17/09/2024 | 1315/0915 | *** | US | Industrial Production |
| 17/09/2024 | 1400/1000 | * | US | Business Inventories |
| 17/09/2024 | 1400/1000 | ** | US | NAHB Home Builder Index |
| 17/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 17/09/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 17/09/2024 | 2200/1800 | CA | BOC Sr Deputy Rogers fireside chat on women in finance. | |
| 18/09/2024 | 2350/0850 | ** |  JP | Trade |
| 18/09/2024 | 2350/0850 | * | JP | Machinery orders |
| 18/09/2024 | 0600/0700 | *** |  GB | Consumer inflation report |
| 18/09/2024 | 0600/0700 | *** | GB | Producer Prices |
| 18/09/2024 | 0600/0800 | ** |  SE | Unemployment |
| 18/09/2024 | 0900/1100 | *** | EU | HICP (f) |
| 18/09/2024 | 0900/1100 | ** | EU | Construction Production |
| 18/09/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 18/09/2024 | 1230/0830 | * | CA | International Canadian Transaction in Securities |
| 18/09/2024 | 1230/0830 | *** | US | Housing Starts |
| 18/09/2024 | 1300/1500 | EU | MNI Connect Video Conference on Euro Area Macro Projections | |
| 18/09/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 18/09/2024 | 1730/1330 | CA | BOC Minutes (Summary of Deliberations) | |
| 18/09/2024 | 1800/1400 | *** | US | FOMC Statement |
| 18/09/2024 | 2000/1600 | ** | US | TICS |
| 19/09/2024 | 2245/1045 | *** |  NZ | GDP |