The USD eases, oil prices strengthen, equity markets and US yields are mixed as markets await Friday's US Jobs report. The USD remains under pressure ahead of an expected Fed interest rate cut on September 18th. Global equities steadied, and US futures edge higher after a rocky start to September as investors look forward to the weekly jobless claims today and Friday's nonfarm payrolls report to assess if the US economy is heading for a soft-landing as the Fed prepares to start its easing policy. Two-year US yields advanced slightly after tumbling on Wednesday on the weak Jolts data, which showed job openings fell to their lowest levels since January 2021. Elsewhere, iron ore slumped towards $90 a ton as China's steel industry remained cautious about boosting output too quickly due to ongoing concerns about China's growth. Bitcoin came under early selling pressure down 2%, while oil prices firmed on possible delays in OPEC supply hike, and gold prices strengthened. In focus today, the US ADP Employment Change, Initial Jobless Claims, and ISM Services PMI will help provide intraday direction to currency markets.
In other news. Biden will block Nippon Steel's proposed takeover of US Steel. Couche-Tard says it's hunting for US deals but stays quiet on Seven & I. PM Trudeau loses deal with NDP, raising odds of an early election. Air Canada will offer pilots a 30% pay boost as the strike deadline nears. China's Xi courts African leaders to ward off geopolitical rivals. The US, Britain, and Brussels will sign an agreement on AI standards. Republican Liz Cheney endorses Kamala Harris for President. The US seizes websites allegedly used by Russia to spread election disinformation. Tesla plans to launch Full Self Driving in China in Q125. China urges the US to 'immediately' lift all tariffs on Chinese goods. Verizon Communications will acquire Frontier in a $20 billion all-cash deal.
In currency markets. The USD continues under pressure due to growing expectations of a 50 bps rate cut, with markets increasing bets from 20% to 30%. AUD finds support as the RBA sticks to its hawkish stance. CNY and Asian currencies firmed by 0.2% on average against the USD. Trading currencies are mixed, with MXN weakening by 0.55%, AUD down 0.1%, NZD, NOK, SEK & CHF flat, JPY gaining 0.15%, and ZAR strengthening by 0.3% against the USD.
In commodity markets. Oil and gold prices strengthened by 0.8%. Natural Gas and wheat prices eased by 0.3%. Silver prices rallied by 1.8%. Copper prices firmed by 0.4%, and soybean prices weakened by 0.55%.
CAD holds steady after strengthening after the BoC announced its interest rate cut yesterday, but the loonie remains under pressure, down 2% against the USD in September. The BoC lowered its key policy rate by 25 bps to 4.25%, with Governor Macklem stating weak domestic growth, and saying a larger could be in order if the economy needs a boost. With continued bearish comments from the BoC governor and the prospect of a Federal Election after the Liberal's lost the NDP support, we anticipate the loonie will remain under pressure against its G7 peers.
EURCAD extends gains, up 0.6%, following the BoC interest rate cut and Governor Macklem's bearish comments.
EUR momentum continues, with the single currency approaching 1.1100 following Wednesday's weak Jolts job data. Despite the ongoing risk-off sentiment, the Euro continues to benefit from the softer USD, as expectations of a 50bps Fed rate cut came back on the table as hard landing fears increase. Investors will continue to monitor today's US Initial Jobless Claims and ADP Employment Change, which will set the stage for tomorrow's key US NFP report. If the ADP Employment Change weakens towards 100k, expect more USD weakness.
GBPEUR holds steady with the lack of key UK or EU economic data releases, with investors mostly sidelined heading into Friday's US NFP report.
GBP heads off monthly lows, breaking through 1.3150 ahead of US jobs data. The pound continues to benefit from the softer USD as increasingly weaker US jobs data increase speculation that the Fed cut 50 bps at its meeting on September 18th. We remain bullish on the pound against the USD, with the expected interest rate divergence between the BoE and the Fed. Intraday, the US jobs data will drive market direction, but we expect investors to remain mainly on the sidelines, preferring to wait for the Nonfarm payroll report on Friday.
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