• FTSE 100 outperforms after sub-forecast UK inflation data, Real Estate and Banking leading
• Stateside, futures are essentially flat pre-FOMC
• GBP undermined as market pricing pivots to 50/50 for pause/hike by the BoE, DXY at 105.00, USD/JPY over 148.00
• EGBs & USTs rise on significant Gilt upside, US yields lower with the short-end leading
• Crude benchmarks pressured after seven sessions of upside, XAU flat while Palladium outperforms
• Looking ahead, highlights include US MBAs, FOMC & Fed Chair Powell's Press Conference, BCB Policy Announcement, BoC Minutes, ECB’s Elderson.

EQUITIES

• European bourses are in the green, Euro Stoxx 50 +0.5%, with the FTSE 100 +0.7% outperforming after sub-forecast inflation data and associated GBP softness.
• Sectors are primarily firmer, Real Estate and Banking names are outperforming on the UK data while Energy and Basic Resources lag with benchmarks mixed/softer.
• Stateside, futures are essentially flat across the board ahead of the FOMC, ES +0.1%, NQ +0.1%; Newsquawk preview available here.
• Click here for more detail.

FX

• Sterling undermined by softer than forecast UK CPI metrics pre-BoE as casts doubt over 25 bp rate hike, Cable retreats from 1.2397 to 1.2335 before recovering.
• Yen finally relents in battle to say above 148.00 vs. Dollar regardless of verbal intervention from a top Japanese FX diplomat.
• DXY regroups, but remains cautious within the 105.00-260 range awaiting Fed guidance.
• Euro retains sight of 1.0700 against Greenback and is flanked by option expiries.
• Loonie loses post-Canadian inflation data thrust as crude prices retreat, Usd/Cad straddles 1.3450 ahead of BoC minutes and conscious of 1.1 bn expiry interest nearby.
• PBoC set USD/CNY mid-point at 7.1732 vs exp. 7.2926 (prev. 7.1733)
• PBoC official Zou said the global FX market has seen great volatility this year and said more attention will be paid to changes in the yuan exchange rate against a basket of currencies. Zou added there is a solid foundation to keep the yuan exchange rate basically stable and said they will resolutely correct one-sided pro-cyclical behaviour for the yuan exchange rate, while they will resolutely curb disruptions to market order and guard against exchange rate overshooting risks.
• US Treasury Secretary Yellen said the Treasury generally understands the need to smooth out volatility in exchange rates but not to influence forex levels, while she added that the view on any Japanese yen intervention would depend on the circumstances, according to Reuters.
• Japan's top FX diplomat Kanda says excessive yen moves are not desirable and watching FX with a high level of urgency, while they will take appropriate steps on FX as needed and are closely communicating with US and overseas FX
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Gilts front-run debt recovery before Central Bank cavalry arrives as softer than consensus UK inflation data calls 25 bp BoE hike into question.
• 10-year bond extends to 96.49 from 95.99, Bunds and T-note tag along within 127.74-30 and 109-10/03+ respective ranges awaiting FOMC.
• Click here for more detail.

COMMODITIES

• Crude benchmarks pressured after seven consecutive sessions of upside and ahead of multiple days of broader macro risk events, with pressure potentially also emanating from the downbeat APAC tone.
• Dutch TTF has trimmed initial upside and has reverted back to the sub-37.50/MWh trough, as participants continue to focus on Australian updates. Most recently, downside came alongside Offshore saying negotiations resulted in some concession on both sides.
• Spot gold is flat with numerous technicals in close proximity, Palladium outperforms potentially on EU auto registration numbers while base peers have managed to lift off of initial lows.
• US Energy Inventory Data (bbls): Crude -5.3mln (exp. -2.2mln), Gasoline +0.7mln (exp. +0.3mln), Distillate -0.3mln (exp. +0.2mln), Cushing -2.6mln.
• Goldman Sachs raises its 12-month ahead Brent forecast to USD 100/bbl (prev. USD 93/bbl), expects modestly sharper inventory draws. Click here for more detail.
• Chevron (CVX) says no agreement has been reached with unions following further consultation sessions held this week with the Fair Work Commission. Ongoing lack of agreement reinforces the view that there is "no reasonable prospect of an agreement between the parties". Engaged in meaningful negotiations to finalise enterprise agreements with market competitive remuneration and conditions. However, unions continue to ask for terms significantly higher than the market.
• Australia's Offshore Alliance says negotiations before the commissioner were useful and resulted in some concessions on both sides; adds that members remain open to compromise but Chevron must table a viable offer.
• China's state planner NDRC to increase retail prices of gasoline and diesel by CNY 385/t and CNY 370/t respectively from September 21st.
• Click here for more detail.

NOTABLE US HEADLINES

• US Treasury Secretary Yellen said the demand-supply imbalances in the US labour market have abated and that US growth needs to slow in line with potential due to full employment. Yellen also commented that there may be spillovers to the US from China's economic difficulties but expects China to use its policy space to avoid a slowdown with major proportions, according to Reuters.
• UAW President Fain is to make an announcement on Friday 10:00EDT/15:00BST. Ford (F) said it is developing contingency plans for further work stoppages in the US including shipping parts that keep Ford vehicles on the road, while Canada's Unifor union reached a tentative agreement with Ford (F) and will prepare to present the unanimously endorsed agreement to members.
• Click here for the US Early Morning Note.

NOTABLE EUROPEAN HEADLINES

• ECB's Schnabel says new supply-side shocks may pose upside risks to inflation; Dynamics in wage growth remain strong, while labour shortages persist; Energy shock threatens to leave permanent scars in the euro area. via a slide release
• The Times' Shadow MPC voted 7-2 in favour of a 25bps hike to the Bank Rate to "ensure inflation is finally under control".
• Swedish Finance Ministry says new spending in the 2024 budget totals SEK 39bln (exp. ~40bln); prioritising fighting inflation and supporting households/welfare.
• Swiss Government Forecasts (SECO): downgrades 2023 CPI (2.2%), upgrades 2024 CPI (1.9%); upgrades 2023 GDP, downgrades 2024 GDP; says global economy likely to take longer to recover from challenges assumed in the June forecast. Click here for more detail.
• UK PM Sunak has reportedly summoned his cabinet, according to Sun reporter Cole; "Looks like we may be hearing the new Net Zero plan today".

NOTABLE EUROPEAN DATA

• UK CPI YY (Aug 2023) 6.7% vs. Exp. 7.0% (Prev. 6.8%); All Services CPI: 6.8% (prev. 7.4%); MM (Aug 2023) 0.3% vs. Exp. 0.7% (Prev. -0.4%)
• UK Core CPI YY (Aug 2023) 6.2% vs. Exp. 6.8% (Prev. 6.9%); MM (Aug 2023) 0.1% vs. Exp. 0.6% (Prev. 0.3%)
• German Producer Prices YY (Aug 2023) -12.6% vs. Exp. -12.6% (Prev. -6.0%); MM (Aug 2023) 0.3% vs. Exp. 0.2% (Prev. -1.1%)
• UK ONS House Price Index (Jul) 0.6% Y/Y vs. Exp. 0.0% (prev. 1.9%)

GEOPOLITICS

• Gulf Cooperation Council Countries and the US called for the completion of the demarcation of Kuwaiti-Iraqi maritime borders and urged Iraq to settle its internal legal status to ensure regulation of maritime in the Khor Abdallah Waterway, while they also urged Iran to fully cooperate with the IAEA, according to a joint statement.
• Iranian President Raisi said Washington should prove its goodwill and determination for the revival of the 2015 nuclear pact, while he reportedly demanded that the US end its sanctions on Iran.
• US military official says the joint military exercises with Armenia will begin today on time.
• Ceasefire has reportedly been announced in Karabakh, according to Sputnik Armenia and Ifax; Karabakh Armenians to meet with Azeri authorities on September 21st, Ifax reports; Armenian Deputy Foreign Minister says Yerevan could theoretically live under Azerbaijan but dialogue is crucial.
• Russia's Kremlin says Russian President Putin is to meet China's top diplomat Wang Yi.

CRYPTO

• Bitcoin is under modest pressure but resides in particularly narrow parameters and is yet to meaningfully deviate away from the USD 27k handle pre-FOMC.

APAC TRADE

• APAC stocks were mostly lower with risk appetite dampened ahead of the incoming deluge of central bank policy announcements including the latest FOMC rate decision and dot plot projections.
• ASX 200 was dragged lower by the commodity-related sectors including energy after oil prices eased back from YTD highs although losses were cushioned by resilience in consumer stocks.
• Nikkei 225 gradually weakened after the latest trade data showed Japanese exports and imports remained in contraction territory, albeit not as bad as feared.
• Hang Seng and Shanghai Comp conformed to the subdued mood after the PBoC unsurprisingly maintained its benchmark 1-year and 5-year Loan Prime Rates at 3.45% and 4.20%, respectively, while Country Garden’s dollar bondholders have been left in the dark regarding a coupon payment which was due on Monday although the developer still has a 30-day grace period.

NOTABLE ASIA-PAC HEADLINES

• Chinese Loan Prime Rate 1Y (Sep) 3.45% vs. Exp. 3.45% (Prev. 3.45%); 5Y (Sep) 4.20% vs. Exp. 4.20% (Prev. 4.20%)
• PBoC official said China's monetary policy still has ample policy room to respond to unexpected challenges and changes, while they will continue to implement prudent monetary policy and step up counter-cyclical adjustments. Furthermore, the PBoC will keep liquidity reasonably ample and enhance the stability of credit growth, according to Reuters.
• NDRC Vice Chairman Cong Liang said China's macroeconomic policies have been effective and that China's economy faces a lot of difficulties and challenges, while he added that economic positives are increasing and those shorting China will surely be proven wrong.
• US State Department said Climate Envoy Kerry met with Chinese Vice President Han and emphasised the need for China to raise ambition in efforts to accelerate decarbonisation and reduce emissions of methane, according to Reuters.
• China exported zero germanium and gallium products in August which are materials key to the semiconductor industry, according to customs data.

DATA RECAP

• Japanese Trade Balance Total (JPY)(Aug) -930.5B vs. Exp. -659.1B (Prev. -78.7B)
• Japanese Exports YY (Aug) -0.8% vs. Exp. -1.7% (Prev. -0.3%); Imports YY (Aug) -17.8% vs. Exp. -19.4% (Prev. -13.5%)
• New Zealand Current Account (Q2) -4.2B vs. Exp. -4.8B (Prev. -5.2B); Current Account/GDP -7.5% vs. Exp. -8.0% (Prev. -8.5%)