Market Brief
The fierce Usd rally took a breather in Asian session, as traders took profits. The EurUsd edged up slightly to 1.4946, while the UsdJpy fell from 109.80 to 108.37 session lows. The Jpy fueled carry trades weakened on the Yen advance, with EurJpy dropping from 163.67 to 161.63. Fed's Stern toned down his pre-FOMC hawkish statements, which took its toll on Wall Street, warning that it would be a while before US growth is above trend, and the decline in energy prices should lead to easing in headline inflation and inflation expectations. Asian regional indexes are following WS lower, with the Nikkei down -2.10%. European index futures are tracking Asia lower. Crude prices are slightly firmer now, trading at $113.43bll.

In Japan GDP q2 release printed at -0.6%, in line with expectations (down from 1.0% prior reading). This is a clear indication of slowing economic activity, especially in light of domestic demand, which fell by 0.3% y/y. With slowing global demand of capital goods, the outlook for Japan seems gloomy at best.

Norges Bank's interest rate decision is due today and we expect the bank to hold steady at 5.75%. With the recent core inflation reading unexpectedly jumping to 2.9% annualized, the probability of a surprise hike is high, but we are still holding for a September move higher rather than today.

In Australia, the consumer confidence picked up slightly rising to 86.2. But, overall, this reading was the first important pickup in around 12 months, while levels are still weak. Given the downward trend on confidence, we expect this to be more of a one off.

In the UK, today's focus will be the BoE's inflation report. The short term inflation expectations have turned for the worse. May's report had forecasts peaking at a touch below 4.0%, but July's data released today should show a rise to 4.4%. In addition, just a few months ago core inflation was at 1.2% but now is 1.9%...a concerning trend. At the same time, the economic outlook has deteriorated considerably. The overriding question will be: has growth fallen enough to bring back down inflation or has the collapse been too much?