Good morning
After a morning of relative calm, a softer JOLTS release sent USD lower yesterday afternoon, with GBPUSD trading as high as 1.3175 and EURUSD to 1.1095, while USDJPY slumped to 144.00. We saw something of a reversal of these moves before the London close but the important thing for me is how the US dollar quickly reacted to weaker data, which puts us on higher alert should Fridays nonfarms disappoint. GBPUSD and EURUSD currently 1.3140 and 1.1080 respectively.
Feds Daly said yesterday that rate cuts will be needed to protect the labour market, no clues as to the size of cuts at the next meeting but she did say that although the Fed can be aggressive when the outlook is clear, there are currently uncertainties and inflation is not fully under control. Leads me to think again that 25bps seems reasonable this time around. However, Fed beige book did show nine districts reporting flat or declining activity, up from five last time
BoC did indeed cut rates by 25bps yesterday, the third such cut in successive meetings, which took rates to 4.25% and initially sent CAD a touch lower before the US jobs number took the limelight and sent USDCAD lower, capping the CAD weakness. BoC’s statement explained that they are getting more worried about the economy and there is potential for weakness in the coming months. Tomorrows Canadian employment numbers will be interesting, a weak set of numbers would well open up talk of a possible 50bps cut by BoC next month
At the other end of the spectrum, we have seen talk from BoJs Takata of possible rate rises from BoJ which pushed yen higher, USDJPY touching 143.05 this morning. We’ve also had hawkish comments from RBAs Bullock, suggesting it is too early to think of rate cuts and the priority remains to bring inflation lower. With the inflation outlook still unclear, she suggests RBA will want to see Q3 CPI before making any decisions. Her comments come after a larger than expected Aussie trade surplus was reported. She speaks again this morning.
More US employment numbers today in the form of ADP, challenger and initial jobless claims, while we also have the ISM PMIs later. The main event comes tomorrow afternoon with the nonfarm payrolls but the market will be watching the releases today for any further clues as to whether the US labour market is in trouble.
Football action this evening comes in the form of the Nations League, with Scotland taking on Poland. England play on Saturday against Republic of Ireland. Seems strange that there should be an international break so soon after the start of the season. I’m sure there is a sensible reason for it.
- 10.00 EU retail sales
- 10.00 RBA Bullock speaks
- 12.30 US challenger job cuts
- 13.15 US ADP employment
- 13.30 US initial jobless claims
- 14.45 US S&P composite PMI
- 15.00 US services ISM
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