Bitcoin Falls as Fed Minutes Dampen Rate Cut Bets — Market Talk

0709 GMT - Bitcoin falls after the Federal Reserve's latest meeting minutes dampened interest-rate cut expectations. The minutes showed most policymakers were more concerned about the risk of higher inflation than a slowdown in the labor market. The worse-than-expected July nonfarm payrolls report released after the meeting likely disrupted these assessments, Barclays analysts say in a note. However, the minutes suggest the "bar for the majority to shift focus to full employment risks in September may be higher than markets seem to think." Barclays expects the Fed to deliver one 25 basis-point rate cut this year in December. The market prices in a 79% chance of a September cut, LSEG data show. Bitcoin falls 0.6% to $113,682, according to LSEG. (renae.dyer@wsj.com)

0654 GMT - The euro could fall as upcoming European purchasing managers' index surveys could be weaker than anticipated, Commerzbank's Michael Pfister says in a note. Much hope is pinned on the PMIs to show positive growth prospects as the data have outperformed other leading economic indicators in recent months, he says. The PMIs could disappoint, however, converging with other indicators that point to a slower recovery, he says. "Given the attention that PMIs usually receive, this is likely to negatively impact the euro." The euro falls 0.2% to $1.1631. The French, German and wider eurozone PMIs are due at 0715 GMT, 0730 GMT and 0800 GMT, respectively. (renae.dyer@wsj.com)

0636 GMT - The dollar rises slightly after the minutes of the Federal Reserve's July meeting signalled policymakers were more concerned about high inflation than a slowing labor market. A "majority of participants judged the upside risks to inflation as the greater of these two risks," the minutes said. The meeting came before the release of the worse-than-expected July nonfarm payrolls report. That means the Fed minutes were "somewhat outdated" and the market reaction was muted, Danske Bank analysts say in a note. Attention now turns to Fed Chair Jerome Powell's speech at the Jackson Hole symposium on Friday. The DXY dollar index rises 0.2% to 98.365.(renae.dyer@wsj.com)

0636 GMT - The Taiwan dollar continues to lose ground versus the greenback, depreciating 0.5% to its weakest levels since May. OCBC strategists think that foreign outflows from the equity market could be one of the factors behind the Taiwan dollar's recent subpar performance. They also point out market chatter around a discussion at the economic committee of Taiwan's legislature about hopes of stabilizing the exchange rate. However, the central bank later said that the exchange rate is influenced by international factors and that it doesn't pursue a specific exchange rate. Ultimately, it's the USD's direction after Fed Chair Powell's speech Friday that will have a bigger influence over USD/TWD, say OCBC's Frances Cheung and Christopher Wong. USD/TWD last up 0.6% at 30.447 after touching 30.511 earlier. (fabiana.negrinochoa@wsj.com)

0622 GMT - India's central bank will likely cut its benchmark interest rate one more time in October this year by 25bps, Barclays economists write in a note. Lower inflation and the tariff overhang have kept the door open to another rate cut, they say. The Reserve Bank of India was prudent in pausing the easing cycle this month amid heightened uncertainty. Development of trade risks will determine policy space and guide RBI's path in the coming meetings, they add. Tariffs will likely settle lower than 50%, but India is preparing for a 50% scenario, they say, noting the incremental thawing of India-China relations and a focus on spurring domestic demand. Should the 50% tariff rate kick in, the drag on growth would be higher than Barclays estimated earlier, they add. (kimberley.kao@wsj.com)

0618 GMT - A boost to the U.K. public finances probably won't keep the Treasury from raising taxes again in the autumn, Joe Nellis at MHA writes in a note. Public borrowing dropped to 1.1 billion pounds in July, the lowest for the month in three years and well below economists' estimates. The drop in borrowing was made possible by a surge in tax receipts following hikes to levies on employers earlier this year, the figures showed. Still, Treasury chief Rachel Reeves remains very likely to raise taxes again when she sets out the government's fiscal plans in October, Nellis says. "While July's figures may offer the Chancellor some limited flexibility, market conditions remain critical," he says.(joshua.kirby@wsj.com; @joshualeokirby)

0615 GMT - German Bunds are expected to get support from subdued flash estimate purchasing managers data as risk sentiment remains shaky, says Commerzbank Research's Hauke Siemssen in a note. The eurozone composite PMI has risen faster than other leading indicators in recent months and improved more quickly than the actual economic development, says the rates strategist. "Our economists therefore expect a below consensus print today, which should provide further support for Bunds even though it is unlikely to revive European Central Bank rate cut expectations," the rates strategist says. The composite eurozone PMI is forecast at 50.7 in August, down from 51.0 last month, according to the Wall Street Journal's poll of analysts. The 10-year Bund yield falls 0.5 basis point to 2.710%, according to Tradeweb.(emese.bartha@wsj.com)

0604 GMT - U.S. Treasurys are little changed in Asian trading ahead of a string of economic data, while Federal Reserve Chair Jerome Powell's speech at Jackson Hole is scheduled for Friday. Meanwhile, the Fed's July minutes were "predictably hawkish--excluding the two dissenting voters--but may not say much about the thinking of the Committee now, given clear signs of a weakening labor market in recent data," SEB's U.S. economist and Fed watcher Elisabet Kopelman says in a note. U.S. data on Thursday include weekly jobless claims and flash estimate purchasing managers indexes. The two-year Treasury yield is up 1 basis point at 3.753%, the 10-year yield is unchanged at 4.296%, while the 30-year yield eases 0.4 basis point to 4.899%, according to Tradeweb. (emese.bartha@wsj.com)

0600 GMT - Bangko Sentral ng Pilipinas will likely be prompted to ease rates further in 2H, given low inflation and slow economic growth, say analysts at BMI, a unit of Fitch Solutions. Headline inflation remained below the Philippine central bank's 2.0%-4.0% target range for five straight months. "With geopolitical risks, particularly surrounding the Israel-Iran conflict, now largely de-escalated, energy-related price pressures are expected to remain contained," they say. BMI expects BSP to cut its policy rate by a further 50 bps to 4.75% by year-end. (amanda.lee@wsj.com)

0543 GMT - The past two weeks have been negative for eurozone government bonds overall, with the 10-year Bund yield nearly breaking the 2.80% level before edging lower, say Natixis' Cyril Regnat and Eya Chammakhi in a note. "In August, the dynamics of euro rates were driven more by strong risk appetite and supply considerations than by data releases or the behaviour of U.S. dollar rates," the analysts say. Fundamentally, expectations of higher issuance, ongoing fiscal loosening, and the European Central Bank's status quo kept the bearish bias intact on the long end of the curve, limiting the scope for a sustained rally, they say. The 10-year Bund yield hit 2.790% last Friday, while it closed at 2.717% on Wednesday, according to Tradeweb data. (emese.bartha@wsj.com)

0434 GMT - Fed Chair Powell will likely seek to maintain maximum flexibility about the next few FOMC meetings in his Jackson Hole speech and lean on the policy path being dependent on inflation and labor-market data, says Blerina Uruci, chief U.S. economist at T. Rowe Price. She points out that there will be one more payroll and CPI report before the Sept. 17 Fed meeting. A no rate-cut scenario is likely for the next meeting if inflation surprises significantly to the upside or the labor market rebounds strongly. A dovish outcome of a 50bp cut is possible if August payroll growth slows below 50,000 a month and the unemployment rate increases, she says in a note. (monica.gupta@wsj.com)

0428 GMT - The Indian rupee is likely to trade with a depreciation bias in the near to medium term and underperform Asian peers, ANZ economists write in a note. The outlook for Indian bond yields is unclear, while ongoing export risks, limited scope for further rate cuts and a lack of credit demand will continue weighing on the rupee, Sanjay Mathur and Dhiraj Nim write in a note. The rupee looks overvalued from the viewpoint of manufacturing competitiveness, especially relative to currencies like the Chinese yuan, and its underperformance despite a weak U.S. dollar environment has been surprising, they add. USD/INR is flat at 86.97. (kimberley.kao@wsj.com)