investingLive.com Americas FX news wrap 7 Aug: Trump taps Stephen Miran as Fed Govenor | investingLive
The USD is closing lower/mixed vs the major currencies. Looking at the changes, the USD is near unchanged vs the EUR, CHF, and CAD at the close and down -0.22% vs the JPY, down -0.64% vs the GBP after the hawkish cut by the BOE, and down -0.28% vs the AUD and -.051% vs the NZD. Price action intraday was up and down vs most of the majors, with the exception of the GBP, which saw the pair move mostly higher throughout the day and is closing near the highs.
The US initial jobless claims ticked up to 226K versus 219K last week. The continuing claims moved higher to 1974K vs 1950K expected. There is some employment weakness in the numbers.
US labor costs increased by 1.6% in the second quarter, but productivity also rose by greater than expected 2.4% versus 2.0% expected. That did come after a -1.8% decline in the first quarter so it was bounce back
Also, wholesale sales rose by 0.3% above the 0.1% expected. The inventory-to-sales ratio remained steady at 1.30. That is down from 1.35 last year at this time and equals recent lows. As a point of comparison, during the supply crunch after Covid, the inventory-to-sales ratio was at 1.20. Should that ratio move lower toward that 1.20 level, it could lead to inflationary pressures.
Atlanta Fed President Raphael Bostic conveyed a cautiously hawkish tone in his latest remarks, reflecting a complex and evolving economic backdrop. He noted that while the fundamentals of the U.S. economy remain solid, the outlook is for continued slowing, accompanied by real uncertainty around the implications for jobs and inflation. He highlighted that businesses are still in a wait-and-see mode on employment, and that stress on lower-income consumers is mounting as excess pandemic savings have been depleted. Although labor market conditions in the Southeast remain resilient, Bostic acknowledged that recent downward revisions to jobs data, particularly in the July report, suggest the labor market may not be as tight as previously thought. This has prompted a reassessment of the Fed’s progress on its employment mandate and raised the question of whether the U.S. is still at full employment.
Bostic warned that tariffs could place upward pressure on prices for the next six to twelve months, adding complexity to the Fed’s inflation outlook. He stressed that tariffs can’t be dismissed as transitory, as they are designed to produce structural shifts that could lead to more persistent inflationary effects. He emphasized that the most important question now is whether these price shifts will be one-time or sustained. While businesses are adapting with a variety of pricing strategies, Bostic believes the tariff episode is likely to last longer than expected and will require close monitoring.
On policy, Bostic reiterated that he still sees one rate cut this year as appropriate, though he emphasized that much data remains before the Fed’s September meeting. He also noted that federal debt issuance may siphon off liquidity, adding another element the Fed must watch. Despite recent challenges, Bostic expressed hope that price pressures will ease by mid to late 2026.
A report on the Fed chair replacement, tapped Fed’s Waller as the favorite. The administration liked his views on rates and the inflationary impact of tariffs. Of note. however, was that Trump has not spoken with him directly yet.
Later in the day, a temporary replacement for Adriana Kugler on the Fed Board was announced. CEA chair Stephen Miran was tapped for the position. Miran also speaks to the non-inflationary impact of tariffs and as such would be a proponent for Fed cuts. Miran was also approved by Congress for his current role, so should not have an issue regard to a timely approval since he has already been vetted.
The U.S. Treasury auctioned off $25 billion of 30 year bonds to poor demand (I gave the auction a grade of D). All the components were worse than the six-month average, including a 2.1 basis point tail above the WI level and a low bid to cover.
Major European indices closed higher with the exception of the UK’s FTSE 100 after the Bank of England cut rates by 25 basis points.
The Bank of England cut rates by 25 basis points but the vote was closer than expectations (5-4 vs expectations of 7-2). Going forward, the markets are pricing in a 50-50 chance of a cut at the next meeting.
US stocks close mixed with the Dow down by -0.51%. The S&P was near unchanged at -0.08% while the NASDAQ index rose by 0.35%.
US yields moved higher with the two-year up 2.3 basis points at 3.723%. The 10 year yield was up 1.4 basis points at 4.246% and the 30 year rose 1.4 basis points at 4.825%.
Crude oil fell and is testing the low of a swing area at $63.61.
Bitcoin moved higher by $2456.02 at $117,487. Pres. Trump signed an executive order opening the door for 401(k)s to invest in bitcoin and other alternative assets real estate.