Markets:

• Gold up $5 to $1723
• US 10-year yields down 15 bps to 2.75%
• WTI crude down $1.69 to $94.69
• S&P 500 down 1.0%
• JPY leads, CAD lags

The bond market is signaling less fear about inflation and more about growth. Yields continue to fall dramatically in a sign that bonds have seen enough hiking to price out inflation with the growing possibility that a hard landing is on the way.

Most of the worries are focused on Europe but today’s US services PMI was the worst since 2009 aside from a few months during the pandemic. It was far below estimates and initially caused USD selling on fewer Fed hikes but eventually transitioned to a classic ‘risk off’ move on worries about global growth.

That sent commodity currencies on a ride as they initially strengthen but then completely reversed to finish the day lower. The euro and pound were stuck in the same dollar rollercoaster as they initially benefited only to give it all back.

The steady winner was the yen as the market begins to envision the rest of the world back in the low-inflation, low-growth trap that the BOJ has been struggling with for decades. USD/JPY fell 100 pips but yen crosses fell further.