Synopsis:

Today's UK labor market report suggests that a November rate cut by the Bank of England (BoE) is not yet certain. While the market is currently pricing in a series of BoE rate cuts, including 50 basis points by the end of this year and 125-150 basis points by next summer, the strong employment growth reported for July and mixed wage data could impact expectations. The BoE is likely to proceed with a cautious approach, and this could support the pound in the near term.

Key Points:

• Market Expectations:

  • The UK rate market anticipates around 50 basis points of BoE cuts by year-end and between 125-150 basis points by next summer.
  • The next rate cut is expected in the November MPC meeting.

• Labor Market Report Highlights:

  • Employment Growth: Increased by 265,000 over the three months to July, the strongest reading since May 2022.
  • Wage Growth: Regular average weekly earnings slowed to 5.1% annually in July, the lowest since June 2022, but the median pay measure showed a rise to 6.2% in August.

• Implications for BoE Policy:

  • The strong employment growth and mixed wage data may lead the BoE to adopt a more cautious stance.
  • The report suggests that an earlier rate cut than November is less likely.

Conclusion:

The UK labor market report indicates that the BoE's November rate cut is not yet a certainty. Strong employment growth combined with mixed wage data could lead to a more cautious approach from the BoE, potentially supporting a stronger pound in the near term. The market's expectation of aggressive rate cuts may need adjustment based on forthcoming economic data and BoE decisions.

The yen outperformed its G-10 peers as the risk tone briefly soured during the early afternoon in New York amid weakness in bank shares and lower oil prices.

The dollar index edged up about 0.1% with the greenback gaining against most counterparts.

The odds of a 50 basis point Fed cut next week rose to 33%.

The euro remained on the back foot after German CPI fell to its lowest level in three years and as German auto shares slumped.
The ECB meets Thursday.

Bank of Canada Governor Tiff Macklem said global trade disruptions could make it harder for the central bank to consistently meet its 2% inflation target.

Focus is on a U.S. presidential debate Tuesday evening and CPI report Wednesday.

U.S.
Treasury yields eased about 4-7bp across maturities in a bond rally led by the front end, which steepened the 2s-10s curve nearly 1.24bp, according to LSEG data.

By New York afternoon trade, the S&P 500 was up 0.31%.

WTI tumbled 4.37% after OPEC lowered its forecast for global oil demand growth in 2024.

Copper slipped 0.88% amid broadly lower metals prices.

Gold rose 0.34% amid a bid for havens and lower Treasury yields.

Heading toward the close: EUR/USD -0.07%, USD/JPY -0.64%, GBP/USD +0.07%, AUD/USD -0.04%, DXY +0.07%, EUR/JPY -0.75%, GBP/JPY -0.22%, AUD/JPY -0.66%.

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• NY opened near 1.1040 after 1.1050 traded on EBS overnight, slide extended

• US$, yen buying and soured risk helped EUR/USD traded down to 1.10155

• EUR/JPY drop to 156.79, USD/CNH rally to 7.1350 helped send EUR/USD lower

• Equity ESv1, oil LCOc1 falls & wider spreads US2DE2=RR added weight

• EUR/USD slide stalled & pair bounced, sat near 1.1025 & was down -0.08% late

• Equities, gold turned positive & yields US2YT=RR softened to lift EUR/USD

• Techs lean bearish; RSIs are falling & pair holds below 5- & 21-DMAs

• US Aug. CPI risk Wed.; ECB risk Thurs., market expects a 25bps cut

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Synopsis:

Credit Agricole is cautious on the GBP in the near term due to two main factors. The GBP is currently one of the most heavily long positions in G10 FX, and many positive factors seem already priced in. The vulnerability of GBP/USD and potential deterioration in market risk sentiment are significant concerns. Meanwhile, EUR/GBP may stay relatively stable due to expectations of a dovish ECB rate cut.

Key Points:

• Long GBP Positions:

  • The GBP is heavily positioned long in G10 FX, suggesting that many positive factors might already be reflected in the currency’s price.

• Factors Affecting GBP/USD Vulnerability:

  1. Exessive Dovish Fed Outlook:
     • Credit Agricole believes the market is still too dovish on the Fed's stance, which could impact GBP/USD negatively.
  2. Market Risk Sentiment:
     • There is a lingering risk of deteriorating market risk sentiment, which could also weigh on the GBP.

• EUR/GBP Outlook:

  • EUR/GBP might remain grounded due to expectations of a dovish rate cut from the ECB, which could limit significant movement in this currency pair.

Conclusion:

Credit Agricole’s caution on the GBP stems from its substantial long positions and the likelihood that the currency's current positives are already priced in. The potential for a dovish Fed and deteriorating market risk sentiment pose risks for GBP/USD, while EUR/GBP is expected to remain relatively stable in light of anticipated ECB actions.

• $CAD firm in early NY, +0.34% at 1.3604; Tuesday range 1.3615-1.3557

• Soft commodities in absence of CA/US data weighs on CAD; oil -3%, copper -1%

• Wednesday's U.S. CPI in focus for clues at pace of Fed easing

• LSEG's IRPR indicates 31% odds for -25bp Fed in Sept; -114bp by Dec meeting

• BoC seen cutting in Oct, -62bp by YE 2024, in addition to 50bp cuts already

• Res 1.3615 Tues high, 1.3648 daily base line, 1.3693 50% of 1.3946-1.3441

• Supt 1.3587 200-DMA, 1.3557 Tuesday daily low, 1.3526 rising 10-DMA

Synopsis:

Nomura is increasing its conviction on a short CHF/JPY position, targeting a level of 163 by the end of October. The decision is influenced by Switzerland's disinflationary pressures and recent economic data, despite the resilient EUR/CHF pair. The firm’s strategy reflects a divergence in monetary and FX policies and aims to balance safe-haven demand.

Key Points:

• Disinflationary Pressures in Switzerland:

  • Softer-than-expected CPI inflation has not significantly boosted EUR/CHF, which remains stable around 0.94.
  • Headline CPI in Switzerland has fallen below June forecasts, driven by deflation in goods prices. The strengthening CHF is partly to blame, prompting potential SNB FX intervention.

• CHF/JPY Trade Rationale:

  • Nomura views the risk of a US economic slowdown as a factor to consider while shorting CHF. They are focusing on CHF/JPY due to the divergence in monetary and FX policies.
  • The firm is targeting a CHF/JPY level of 163 by end-October and has raised their conviction on this trade from 3/5 to 4/5.

Conclusion:

Nomura's increased conviction in their short CHF/JPY position reflects concerns about Switzerland's disinflationary trends and a strategic response to policy divergences. The target of 163 by the end of October is set to capitalize on the expected FX and monetary policy dynamics.

• Cable hits 1.3065 after extending south from 1.3108 (London morning high)

• 1.3065 is seven pips shy of Asian session three-week low (pre-UK jobs data)

• Harris-Trump debate gets underway at 9pm ET (scheduled to last 90 minutes)

• GBP/USD might drop towards 1.3000 if Trump is perceived to "win" debate

• Conversely, a perceived debate "win" for Harris might lift cable to 1.3145

• UK July GDP data due Wednesday at 0600 GMT; growth of 0.2% f/c vs 0.6% in Q2

Synopsis:

BofA predicts that the August CPI report will reflect continued positive inflation trends. The bank expects a 0.2% month-over-month increase in both headline and core CPI. On a year-over-year basis, headline CPI is projected to drop to 2.6%, while core CPI is anticipated to remain at 3.2%. The headline NSA index is forecasted to be 314.864.

Key Points:

• Monthly CPI Increases:

  • Headline CPI: Expected to rise by 0.2% (0.15% unrounded).
  • Core CPI: Expected to rise by 0.2% (0.21% unrounded).

• Yearly CPI Trends:

  • Headline CPI: Forecasted to decrease to 2.6%, down three-tenths from previous readings.
  • Core CPI: Expected to hold steady at 3.2%.

• Index Forecast:

  • Headline NSA Index: Anticipated to print at 314.864.

Conclusion:

BofA expects the August CPI report to show ongoing positive inflation trends, with both headline and core CPI increasing by 0.2% month-over-month. The yearly headline CPI is projected to decrease slightly to 2.6%, while core CPI remains unchanged at 3.2%.

Synopsis:

Goldman Sachs anticipates a moderate increase in core CPI for August, forecasting a 0.23% rise, slightly above consensus. The firm expects core CPI to be up 3.2% year-over-year. The projection incorporates expected rebounds in specific categories like airfares and more moderate declines in car prices. Overall, headline CPI is expected to rise 0.18%, driven by higher food prices and lower energy costs.

Key Points:

• Core CPI Forecast:

  • Monthly Increase: Expected to rise by 0.23%, surpassing the 0.2% consensus estimate.
  • Yearly Increase: Forecasted to be 3.2%.

• Recent Trends:

  • Previous Months: Core CPI rose 0.16%, 0.06%, and 0.17% in the last three months, with significant declines in autos and airfares contributing to lower increases.

• August Expectations:

  • Used and New Car Prices: Anticipated to decline moderately, with used car prices down by 0.5% and new car prices down by 0.1%.
  • Airfares: Expected to rebound by 1.5% due to seasonal factors.
  • Shelter Costs: Moderation expected, with Owner's Equivalent Rent (OER) rising by 0.33% and rent by 0.29%, following larger increases in July.

• Headline CPI Forecast:

  • Monthly Increase: Expected to be 0.18%.
  • Drivers: Higher food prices (+0.3%) and lower energy prices (-0.7%).

Conclusion:

Goldman Sachs expects a slight upward surprise in core CPI for August, reflecting modest rebounds in specific categories and a moderation in shelter costs. The headline CPI is projected to show a small increase, with higher food prices offset by lower energy costs.

• AUD/USD fell to a 1-month low of 0.66445 during the Asia trading session

• US yield US2YT=RR gains lifted the US$; USD/CNH rallied to 7.1320

• AUD/USD bounced however, NY opened near 0.6675, pair was up +0.23%

• Iron-ore DCIOc2, AUD/JPY gains & equity ESv1 bounce helped the lift

• AUD/USD rallied back above the 55-DMA & daily techs flash warnings to shorts

• Daily RSI diverged on the low and a daily bull hammer candle formed

• Falling monthly RSI, hold below 10- & 21-DMAs give shorts some comfort

• Only 2nd tier US data today; US Aug. CPI is a key risk for Wednesday

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• Dollar stable, yen wobbles ahead of U.S. inflation data nL1N3KS01U

• USD/JPY has risen from Asia's 142.86 low, to 143.71 in Ldn, EBS data shows

• Traders still long yen via spot and options nL1N3KS0BZ

• Yen traders need to look beyond the Fed/BOJ story nL1N3KR10E

• USD/JPY chart points to an eventual slump through 140 nL1N3KS08H

• EUR/JPY and USD/JPY currency pairs have a very high log correlation

Cable will be impacted by interest rate decisions and monetary policy guidance from the Federal Reserve and Bank of England next week, with the reaction to be magnified if there is a dovish surprise from either - or both.

GBP/USD might jump towards 1.33 if the Fed cuts rates by a larger than expected 50 basis points on Sept.
18, and/or drop towards 1.29 if the BoE defies the consensus and cuts rates a day later.

Markets currently see a 27% chance of a half-point Fed cut next week, when a 25 bps reduction is fully priced, and a 22% chance of a 25 bps BoE cut on Sept.
19 (a quarter-point BoE cut is fully priced for November). 0#BOEWATCH

Cable was last at 1.29 on Aug.
16 - a week before Governor Andrew Bailey said further BoE rate cuts would not be rushed and Fed Chair Jerome Powell said the 'time has come' to cut rates.
It was last at 1.33 in March 2022.

Related comment: nL1N3KM08N

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• Soon-to-expire FX option strikes often attract the most cash hedging flows

• These hedging flows tend to keep FX contained near the option strikes

• There are billions of euros of soon to expire EUR/USD option strikes near-by

• 2.4 billion euors of 1.1050 expired Mon, there's 2 billion 1.1040-50 Tuesday

• Thursday sees almost 5-billion euros between 1.1045-55 - that's huge

• Wednesday's U.S. CPI not expected to inject much FX volatility

• If Thurs ECB fails to move EUR/USD, options should continue to dominate

• Standout FX option strike expiries this week nL1N3KR06U

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• Cable rises to 1.3096 (intra-day high) after healthy UK employment data

• Jobs up 265k in 3mths to July vs 123k f/c. Pay growth 5.1% YY, as forecast

• Data underpins consensus expectation of BoE rate hold next week (Sept 19)

• 1.3058 was three-week low for GBP/USD in Asia (1.3068 was Monday's low)

• Offers likely around 1.3100 (former support level). 1.3111 was Friday's low

• Harris-Trump debate at 9pm ET (0100 GMT). US presidential election Nov 5

• EUR/USD reaches 1.1029 EBS on Sep 10 from 1.1201 on Aug 26

• Pair was overbought at the high which led to this correction

• Base 20-day Bollingers at 1.0972 is potential limit for the pullback

• The 55-DMA is 1.0937 and Aug 15 low at 1.0950 traded ahead rise to 2024 peak

• Rising daily Ichimoku cloud - peak 1.1041 end-sep - may support future rise

• The 100-DMA has just crossed above 200-DMA - Golden Cross - bullish

• Downside break out already stalling but daily momentum flips negative

• Daily RSI is neutral but slow stochs are nearing oversold levels

• A minimum correction off the 1.2666-1.3269 climb met at 1.3127

• The 38.2% Fibo of that move is at 1.3039

• To the topside the 10-DMA stands over sterling at 1.3136

• A Sept. 20 1.2828-1.2830 cloud twist could begin to attract price

• We stand aside for now

• GBP/USD trader TGM2338

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• AUD/USD unchanged in Asia after trading in a 0.6666-0.6645 range

• Holds above strong support at 0.6642-47 but inability to bounce concerns

• Recovery attempts fade on reduced bets of a larger Fed September rate cut

• Persistent concerns over China's economy weigh; China trade data mixed

• Australian consumers downbeat in September amid economic worries

• U.S. CPI Wed key for immediate trend, will determine size of Sep rate cut

• Supports 0.6642-47, 0.6620-25, resistance 0.6685-90, 0.6720-25

• For more click on FXBUZ

Synopsis:

SocGen highlights the recent expansion of factors driving gold's summer rally, including central bank purchases, shifting US election dynamics, and increasing Chinese investor interest. While traditional drivers like real interest rates and dollar strength remain influential, these new factors are shaping gold's market direction. The outlook for gold is bullish in the medium to long term, but short-term risks include potential shifts in Chinese investment behavior and the US election outcome.

Key Points:

• New Drivers for Gold Rally:

  • Central Bank Purchases: Increased gold buying by central banks is a significant new driver.
  • US Election Dynamics: Changing election scenarios, especially a rise in the odds of a Trump victory, could further boost gold.
  • Chinese Investor Interest: Growing interest from Chinese investors has added momentum to the gold market.

• Medium to Long-Term Outlook:

  • Bullish Sentiment: Gold is expected to maintain a bullish trend due to anticipated US monetary easing and ongoing central bank gold purchases.

• Short-Term Risks:

  • Chinese Speculative Activity: A decline in speculative activity by Chinese investors could occur if more attractive domestic investment opportunities arise, potentially influenced by stimulus packages. However, major stimulus might be delayed until the next US administration's agenda is clearer.
  • US Election Impact: Changes in election polls could affect gold's performance, particularly if there is a significant shift towards a Trump victory.

Conclusion:

SocGen remains positive on gold's medium to long-term outlook, supported by central bank buying and expected US monetary policy easing. However, short-term risks include potential changes in Chinese investment patterns and evolving US election dynamics. The gold market is currently influenced by both traditional and new factors, making it essential to monitor these developments closely.

• Steady in a 1.1028-1.1039 range, with the US dollar up 0.1%

• There is no tier one EZ data, so yield spreads and the USD to lead EUR

• Tight range trading is likely ahead of the US Presidential debate

• Charts; daily momentum studies slip, 21-day Bollinger bands contract

• 5, 10 & 21-day moving averages coil - mixed signals show little bias

• A close below 1.0996, 0.382% of the Jun/Aug rise would end the uptrend

• Monday's 1.1090 high then Friday's 1.1155 top are initial resistance

• 1.1000 1.907 BLN and 1.1040/50 1.963 BLN are the close Sep 10th strikes

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• Steady after closing down 0.45% with the U.S. dollar up 0.45%

• Sterling likely quiet in Asia ahead of today's UK unemployment data

• Expecting tight range trading in Asia led by the US dollar and risk appetite

• Charts - Friday's bearish outside day, was confirmed by Monday's fall

• 5, 10 & 21 daily moving averages coil as daily momentum studies slip

• 21-day Bolli bands contract - a neutral setup but the uptrend struggles

• Monday's 1.3142 high then Friday's 1.3238 top are first resistance

• A close below 1.3038, 38.2% April/August rise would be a bearish signal

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• AUD/USD stays offered in Asia after closing 0.15% lower on Monday

• Broadly stronger USD weighs as traders reduce bets on larger Fed rate cut

• Chances of a 50 bps cut in Sep at 29%, had jumped to 50% after NFP data Fri

• Growing concerns over China's economy, weak commodity prices undermine AUD

• China August trade data Tuesday and U.S. CPI Wed key for immediate trend

• Monday range 0.6688-0.6648; supports 0.6642-47, 0.6620-25,

• Resistance 0.6685-90, 0.6720-25

• For more click on FXBUZ

• +0.05% after closing down 0.45% with the U.S. dollar up 0.45%

• Draghi - EU needs to be faster on decisions, investment to match US/China

• As Germany struggles economically, fresh ideas may be the answer

• Charts; daily momentum studies slip, 21-day Bollinger bands contract

• 5, 10 & 21-day moving averages coil - mixed signals show little bias

• A close below 1.0996, 0.382% of the Jun/Aug rise ends the uptrend

• Monday's 1.1090 high then Friday's 1.1155 top are initial resistance

• 1.1000 1.907 BLN and 1.1040/50 1.963 BLN are the close Sep 10th strikes

For more click on FXBUZ

Synopsis:

ING expects EUR/USD to remain near the 1.1100 level this week, with the European Central Bank's policy meeting being the key focus. A 25bp rate cut is anticipated, but significant downward revisions to inflation forecasts could negatively impact the euro.

Key Points:

• Market Reaction:

  • Friday’s Performance: EUR/USD struggled to maintain intra-day gains as market participants remained uncertain about whether the Fed will cut rates by 25 or 50 basis points.
  • ECB Meeting Focus: A 25bp rate cut is expected at the ECB's meeting on Thursday, with the quarterly forecast update being crucial. Significant downward revisions to back-year inflation forecasts could weigh on the euro.

• Near-Term Outlook:

  • EUR/USD Range: The pair is expected to stay around 1.1100 over the next few days. External factors such as the US election debate might influence movements but are not anticipated to cause significant deviations.

Conclusion:

ING predicts that EUR/USD will likely hover near 1.1100 in the short term. While a 25bp rate cut by the ECB is expected, any major downward adjustments to inflation forecasts could negatively affect the euro. The upcoming US election debate may be a notable factor driving the currency pair in the near term.

Corrects level in first bullet, removes reference to fix

• USD/JPY finds intraday buyers near ~142.65/66

• US share gains and higher UST 2-year yields support pair; US consumer credit in July rose $25.45 billion or double expectations

• Expiries this week near 142 should limit USD downside

• Japan to see money supply data for August on Tuesday

• Yen crosses are little changed for New York’s session, MXN/JPY finds support ahead of 7.00

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