Quantitative Easing Has Cost Hundreds of Billions of Dollars

1. There are higher expectations for the ECB to "skip" a rate hike in September.

2. The euro area economy slows.

3. Trump leads with 54% support in a U.S. election poll, 37 points ahead of DeSantis.

4. OPEC oil outputs fell to a two-year low in July., mainly due to Saudi Arabia's additional production cuts.

The preliminary July HICP y/y in the euro area stood at 5.3%, compared to the expected 5.3% and the previous reading of 5.5%; the preliminary core HICP y/y came in at 5.5%, compared with the expected 5.4% and the previous figure of 5.5%. While headline inflation continues to fall, core inflation remains flat after two straight months of declines that have so far failed to sustain.

Prices in services once again outperformed, accelerating to up 5.6% y/y in July from 5.4% in June, likely reflecting higher nominal wages and a greater desire to spend on travel and recreation after the COVID-19 outbreak.

Stubborn inflation in the service sector, coupled with an acceleration in food prices, which rose by an alarming 9.2%, is likely to heighten the misgivings of the ECB hawks who are concerned that the trend of price growth has become entrenched.

Overall, excessive inflation is now coming down only slowly. The effects of ECB rate hikes are still difficult to be assessed due to the lag. After the release of the data, the market has higher expectations for the European Central Bank to skip a rate hike in September. If the economic indicators in August continue to be weak, they will increase this probability. On the contrary, the ECB is likely to continue to raise interest rates.

The preliminary Q2 GDP in the euro area increased by 0.6% y/y, higher than the market expectations of 0.5% and lower than the previous value of 1.1%. Germany, Europe's economic powerhouse, suffered a weak second quarter, with its GDP flat q/q, while Europe's second-largest economy France grew slightly in Q2 at 0.5% y/y boosted by a surge in exports.

The recent deteriorating economic outlook in the euro area was largely due to weak demand, said Christine Lagarde at the press conference for the rate decision. Considering the GDP and HICP performance in the euro area, the likelihood of a pause in rate hikes in September has increased, in part due to slower growth and signs of a temporary cooling in underlying inflation.

The New York Times and Siena College on July 31 released the results of a joint poll of Republican voters, showing that among all the Republican presidential candidates, Donald Trump took the absolute lead with 54% support, 37 points ahead of Ron DeSantis, and the rest of the candidates' support did not exceed 3%, according to The New York Times. The survey shows that as Republican voters' concerns about Trump's "confidential document event" fade, Trump has gained absolute support across voters' age groups, gender, region, party affiliation, and education level.

Oil production by the Organization of the Petroleum Exporting Countries (OPEC) fell in July as Saudi Arabia made additional voluntary output cuts as part of the OPEC+ group's latest deal to support the market and the suspension of exports at a Nigerian port constrained supplies, a survey showed on Monday. OPEC+ is an alliance of oil producers formed by OPEC and its allies, including Russia.

OPEC produced 27.34 million barrels per day of oil in July, down 840,000 bpd from June, the survey found. It was the lowest level since September 2021, according to the Reuters survey.

Saudi Arabia had pledged to cut production by 1 million bpd in July as part of the OPEC+ deal reached in June to extend production curbs until 2024. Oil prices began to surge as a result, with Brent crude futures rising above $85 a barrel from near $71 at the end of June.

UTC+8 12:30 The Reserve Bank of Australia announces its interest rate decision

UTC+8 22:00 U.S. ISM Manufacturing PMI (Jul)

UTC+8 22:00 U.S. ISM Manufacturing PMI (Jul)

UTC+8 22:00 Chicago Fed Chairman Goolsbee delivers a speech

Bank of Japan chosen to keep the country's benchmark intrigued rate unaltered at -0.1% in line with desires. Earlier to this, the Tokyo CPI for July outflanked the anticipated (YoY) alter of 2.8% with a alter of 3.2%.

The information and the arrangement of the Japanese Central Bank were negative for the Japanese yen against the rest of the other major monetary standards. As the US Government Save extraordinary to preserve its fixing arrangement, the variables were in favor of the quality of the bullish bounce back for the USD/JPY money combine, which bounced upward towards the resistance level at141.17, beginning from the support at 138.06 within the same session.

It was the leading every day execution for the money match in months, and closed exchanging steady around the level of 141.15, which clears the way for the bulls to control the drift.

The cost of the USD/JPY cash combine has presently progressed to exchange a number of levels over the 100-hour moving normal line. As a result, it shows up that the money match is approximately to breach the overbought levels of the 14-hour RSI. Within the close term, and agreeing to the execution on the hourly chart, it shows up that the USD/JPY cash match is exchanging inside a bullish channel arrangement. This demonstrates a noteworthy short-term bullish predisposition in showcase opinion. Hence, the bulls will see forward to riding the current wave of picks up towards 141.58 or higher to the resistance at 141.97.

On the other hand, the bears will target benefits at around 140.71 or underneath the back at 140.26. Within the long run, and concurring to the execution on the day by day chart, it shows up that the USD/JPY combine is around to complete the arrangement of the Head and Shoulders design. This shows that the bears are attempting to control the match. Hence, the bears will see to thrust the match underneath the neck area towards 138.81 or down to the bolster at 136.85. On the other hand, the bulls will target long-term benefits around 143.02 or higher at the 144.87 resistance.

The former US president has been indicted twice in the past four months - once in New York for alleged financial crimes and once in a federal court on charges that he mishandled sensitive government documents and obstructed an investigation.

He may be on the verge of a third indictment, for attempting to overturn the results of the 2020 election, and a fourth in Georgia for pressuring state officials to reverse his 2020 defeat there.

Through this all, Mr Trump's campaign has not just continued unabated, it has thrived.

An average of opinion polls from 31 July shows he has a commanding lead of 37 points over his nearest rival, Florida Governor Ron DeSantis.

No-one else in the crowded field of 14 candidates scores over 6%, and more than half of them are not even at 1%.

Back in mid-February, Mr Trump's lead over Mr DeSantis in the average of polls was just two points (41% to 39%). That turned out to be the Florida governor's high point so far, however. While his star has faded and his poll numbers have plummeted, Mr Trump's support has remained rock solid.

And since the first indictment was brought in the first week of April - making Mr Trump the first former US president to face criminal charges - it has actually grown.

According to the average of polls, Mr Trump has been the first choice of a majority of Republican voters ever since that first arrest and court appearance.

According to Clifford Young, president of US public affairs with Ipsos, the bond between Donald Trump and his supporters - which equates to about 40% to 45% of the Republican electorate - will be difficult to break.

"They see the world through his eyes," he says. "His base believes he's been wronged. They believe that the indictments are politically motivated."

After Mr Trump's indictment for illegally retaining classified documents, the BBC spoke with a panel of Republican voters about their views on the former president - and found similar sentiments.

"This is so obviously a blatant attempt to take Mr Trump out of the presidential running," 61-year-old Trump-supporting Rom Solene of Arizona said. "And it is a sad day for our nation, considering that others, including Mr Biden, have been caught with classified documents in their possession."

Even Republicans like Luke Gordon, who doesn't support Mr Trump's attempt to recapture the White House, viewed the indictment with some scepticism.

"I don't doubt the legitimacy of the claims in the indictment, and I do not defend Trump's actions," the 21-year-old New Yorker said. "However, the motivation behind his prosecution and investigation remains of grave concern."

A June poll by CBS News, the BBC's partner in the US, illustrates the point

· 76% of likely Republican primary voters said the classified documents indictment was "politically motivated".

· 38% of those voters thought it would be a national security risk if the former president kept nuclear or military documents after he left office. For the US public at large, the number is 80%.

· 61% of Republican voters said Mr Trump's indictments did not change how they viewed the former president, while 14% said it made them see him more positively.

"We're really dealing with the tale of two Americas and two distinct bubbles," says Mr Young. "There's one bubble that sees Trump's behaviour as lawless. And there's another bubble that sees him as their champion - and that he's being attacked because of that."

Given this dynamic, there is little evidence that a third or even a fourth indictment will measurably alter the landscape of the Republican presidential race.

Indicting Mr Trump for challenging the 2020 election results, for instance, may not resonate with Republicans, 84% of whom, according to a March CNN survey, shared the view that Joe Biden did not "legitimately" win the 2020 election.

That is a serious problem for his Republican rivals who are left to fight it out for the roughly 60% of the Republican electorate who tell pollsters they could be persuaded to back another candidate or would never support Mr Trump.

Most have been reluctant to criticise the former president over the criminal charges, conscious that it would upset his base, but have also struggled to make the case for why voters should pick them instead.

If Mr Trump's indictments haven't moved the political needle, next year's big question could be whether trials and possible convictions could finally alter the sharp partisan divides in US public opinion on Mr Trump.

Throughout the first half of 2024, Mr Trump will have to deal with a clash between campaign events and court appearances at his trials which could each last weeks.

He said on Friday that he would not end his presidential campaign even if he were found guilty and sentenced.

That's uncharted territory in US politics, but Mr Young says the key "leading indicators" to watch will be whether Mr Trump's favourability standing in polls and his "electability" - the view as to whether he can win back the White House - take noticeable shifts.

If that's the case, it could presage an erosion of his support in a way that the string of indictments, as well as all the other controversies over his eight years in the public sphere, have not.

For the moment, however, early head-to-head polls show Mr Trump within striking distance of the current president. A recent Economist-YouGov poll had Joe Biden ahead of Mr Trump 44% to 40%. Morning Consult had the Democrat ahead by 2 points, 43% to 41%. Both leads are within the margin of error.

That suggests that familiar partisan battle lines are already being drawn - and that the 2024 election, like the two previous contests involving Mr Trump - will be narrowly decided.

The Euro to Dollar exchange rate has seen a reversal of its July rally, prompting investors to closely monitor critical factors that may impact its trajectory in the coming week. While the rate is currently underpinned by a cluster of technical supports just below the market, the direction of the exchange rate will be heavily influenced by several economic indicators and events.

Recent developments in the Asia Pacific trading session have contributed to supporting the Euro against the Dollar. Strong annual increases in Japanese retail sales for June and better-than-expected manufacturing PMI data from China's Federation of Logistics and Purchasing have dampened demand for the Dollar, favoring the Euro in early European trade.

However, the focus now shifts to the imminent release of European inflation figures for July, which will play a crucial role in shaping the Euro-Dollar rate going forward. Changes in the European Central Bank's (ECB) tone towards data dependency, rather than forward guidance, have heightened market sensitivity to inflation trends. Economists anticipate a decline in the main European inflation rate from 5.5% to 5.3%, while core inflation, which excludes volatile items like energy and food, is expected to decrease from 5.5% to 5.4%.

Any persistent or unexpected stickiness in inflation rates could pose challenges for the ECB, particularly if accompanied by indications of economic weakness in the Eurozone. GDP data for the second quarter will be released alongside the inflation figures, with projections indicating a reversal of the -0.1% contraction experienced in the prior period, supported by improved performance in France and Spain.

The US will also witness a flood of economic figures that will impact the Euro to Dollar rate. Institute for Supply Management surveys of the manufacturing and services sectors, along with three different measures of labor market health, will be closely monitored by investors. The Federal Reserve's 'Senior loan officer opinion survey' for Q2 2023 will also be important to gauge FOMC policy direction.

Although the Euro has corrected lower, it remains critical for the rate to hold above the support cluster around 1.0905/1.0833, including the rising 55-day average, uptrend from last September, and early July lows. A break below this level may indicate further weakness, with a potential downside target at 1.0913-1.1150.

Ultimately, the outlook for the Euro to Dollar exchange rate hinges on a delicate balance of economic indicators, central bank policies, and global market sentiment. The outcome of the imminent data releases and central bank decisions will likely shape market expectations and influence investment decisions. Investors should remain vigilant and adaptable as they navigate the evolving landscape of the Euro-Dollar exchange rate, with careful consideration of risk management and diversification strategies.

The Fed's preferred measure of labor cost growth is still running faster than it was before the pandemic and above what would be consistent with 2% inflation over the medium term. That said, compensation growth appears to have turned a corner as supply and demand in the labor market have come into better balance. The FOMC probably will want to see the recent trend sustained before it feels confident that inflation is firmly on its way back to 2%, but today's report is overall encouraging for achieving this goal.

The Employment Cost Index increased 1.0% (not annualized) in the second quarter, a tenth below the Bloomberg consensus forecast. Both the year-over-year and quarter-over-quarter growth rates declined compared to Q1, an encouraging sign that the momentum in labor cost growth is slowing. The ECI provides an encompassing view of labor cost pressures as it includes private and public sector workers as well as the benefit portion of compensation (about 30% of the total). Moreover, the ECI controls for compositional shifts in the workforce. For example, the higher frequency and more timely average hourly earnings data can be influenced by big moves in employment for workers at either end of the income distribution. As an extreme example, in April 2020 average hourly earnings "increased" a series record 4.2% in a single month amid huge COVID-induced layoffs that were more heavily concentrated in lower-paying industries such as leisure & hospitality. Given the ECI's desirable features as a dataset, it is generally viewed as the Fed's preferred measure of labor compensation costs.

Both private and public sector compensation grew 1.0% in the quarter (4.1% annualized). For the former, wages and salaries increased 1.0% while benefit costs rose 0.9%. Excluding incentive paid occupations, which can sometimes introduce noise into the data, compensation growth was 1.0% in the quarter, matching the increase for all workers. For state and local government workers, an increase in benefits (1.0%) outweighed a 0.8% increase in wages and salaries.

The details of the ECI report are consistent with a labor market that is still tight but is gradually cooling from the scorching heat experienced last year. Compensation growth appears to have turned a corner as labor supply and demand come into better balance. A rough rule of thumb is that a quarter-over-quarter ECI reading of 0.8% (~3.2% annualized) is about what is consistent with the FOMC's 2% inflation target over the medium term. The 1.0% increase in the ECI in Q2 was still stronger than this rule of thumb, but it was the slowest pace of growth in two years. The FOMC probably will want to see the recent trend sustained before it feels confident that inflation is firmly on its way back to 2%, but today's report is overall encouraging for achieving this goal.

One of our wage growth projection methods that looks beyond the ECI also signals that momentum in compensation costs is slowly fading. The method designates a period with "high" wage growth if the year-over-year percent change in average hourly earnings is 2.9% or greater, which represents one standard deviation above the last cycle's average growth of 2.4%. In the second quarter, the probability of "high" wage growth over the next four quarters fell five percentage points to 54%. The decline marks the third consecutive quarter that the probability of "high" wage growth has fallen and suggests that the labor market's inflationary pulse is directionally improving.

Euro zone inflation fell further in July and most measures of underlying price growth also eased, in a largely comforting sign for the European Central Bank as it considers ending its severe run of interest rate hikes.

Consumer prices grew by 5.3% this month versus 5.5% in June, extending a downwards trend that started in the autumn. Excluding energy and unprocessed food, prices increased by 6.6% after a 6.8% rise a month earlier.

While this is still a far cry from the ECB's 2% target, the reading may help policymakers argue that inflation in the euro zone is on a clear, albeit gentle, downward path and they can afford to skip raising interest rates at least at their next meeting.

"The latest data point has been consistent with the disinflation trend," Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said.

Large sellers of consumer goods like Unilever, brewer Heineken and food giant Nestle have all signalled to varying degrees that they expected the bulk of the price hikes to be behind us.

The ECB raised borrowing costs for the ninth consecutive time last week, but President Christine Lagarde flagged the possibility of a pause in September as inflation pressures showed tentative signs of easing and recession worries mounted.

Prices for services stood out once more, however, as they accelerated to a 5.6% annual increase in July from 5.4% in June, likely reflecting growth in nominal wages and a greater desire to spend on travel and entertainment after the COVID-19 pandemic.

The stubbornness of inflation in services, along with a new acceleration in the price of food to an alarmingly high 9.2%, was likely to strengthen the misgivings of policy hawks at the ECB who fear the high price growth has been getting entrenched.

"Services inflation is the area where monetary policy should have the greatest influence because it reflects domestic demand," Dirk Schumacher, an economist at Natixis said.

"So ECB policymakers could agree to pause in September but specify that October is very much live."

Hawks could also point at hard data about economic output, which showed the euro zone returned to growth with a 0.3% increase in the second quarter of 2023 despite negative sentiment and activity polls.

But half of that increase was due to Ireland, where output was boosted by multinationals headquartered there.

And the weak survey data has continued to come in in recent days, fuelling talk of a recession in the euro area that the ECB is still hoping to avoid.

The federal statistics office said retail sales were down 0.8% month-on-month. Analysts polled by Reuters had predicted sales to rise 0.2% on the month.

"Today's data broadly validated our near-term outlook, which anticipates very weak growth in H2, and a summer moderation in the pace of improvement in inflation followed by a relatively sharp fall in Q4 as some of the temporary effects propping services inflation dissipate," Oxford Economics said in a note to clients.