USD
The broad dollar fell almost half a percent through yesterday’s trading, a move catalysed by JOLTS job openings which significantly undershot expectations. Consensus forecasts had looked for a reading of 8100k openings in July, marginally down on a June print of 8184k. Instead, yesterday’s number fell to 7636k, albeit from a downwardly revised 7910k prior reading. With markets already fretting over the US labour market after last month’s payrolls disappointment, this latest JOLTS figure has only added to fears. Today, Challenger job cuts, ADP employment data, initial jobless claims, and ISM services, are all set to keep the focus on the US and the state of the jobs market, before August payrolls on Friday provides the week’s main entertainment.
EUR
While yesterday’s 0.35% gain for EURUSD was still a positive move, it underperformed a broader FX rally against the dollar. In one sense, this is something of a surprise. Limited domestic data flow should have meant there was little standing in the way of a euro climb. In our view, however, this price action is instructive. The case for further euro strength from current levels looks challenging to us. Growth in the bloc remains weak, while the ECB should lead the pack of G10 banks cutting rates, a backdrop that should be weighing against euro upside, leaving the single currency to underperform. We doubt today’s main eurozone release, coming in the form of July retail sales will alter this dynamic either. Instead, US jobs data should remain in the driving seat for EURUSD through to the weekend.
GBP
Similar to the euro, sterling also broadly underperformed the move in the broad dollar yesterday. Yes, GBPUSD rose 0.3%, but this was still a disappointing performance. That said, in contrast to the euro, GBP fundamentals look more constructive, an outcome that we expect to see the pound outperform over the coming months. More immediately, however, it is the BoE’s Decision Maker Panel that is in focus this morning. While we remain sceptical of the survey’s utility, the MPC pays it close attention, making it relevant for markets. 3m output price expectations are seen falling 0.2pp to 3.5%, while 1-year ahead inflation expectations are projected to tick up 0.1pp to 2.6%. If realised, this is likely to be net neutral for the MPC, keeping markets guessing on the outcome of the policy meeting later this month, and leaving sterling fortunes in the hand of US data once again today.
CAD
As expected, the BoC cuts rates by 25bp in their latest policy decision, announced yesterday. Similarly in line with expectations, BoC Governor Macklem ran back commentary from July suggesting that more rate cuts are likely to be delivered, data permitting. That said, with markets assigning a roughly 25% chance that the Governing Council could cut by 50bps ahead of the event, the decision skewed marginally more hawkish than market expectations had priced, ultimately seeing a 0.3% climb for USDCAD. That said, we still see short-term risks for USDACD as skewed to the downside. Growth remains soft, while the BoC looks set to continue cutting in 25bp increments at successive meetings. All told, we expect both of these factors to weigh on the loonie over the short to medium term.
This content was originally published by our partners at Monex Europe.