North American FX Open - All about those NFPs

The DOLLAR hit its lowest levels of the week in early European trade, as the market positions itself for today's all important US NFPs report. The weak updates from the ADP and JOLTS report this week have been countered by the fall in jobless claims and the relative strength of the services sector, so it seems like the NFPs will be the deciding influence, on whether the Fed cuts by 25bps or 50bps in twelve days time.

After the 114k print from NFPs in July, the consensus forecast for August is for a number in the 165k region, with the unemployment rate expected to edge back down to 4.2% from 4.3%. Keep an eye on hours worked and the participation rate, but there is no denying that the market has set itself up for further disappointment. Which might mean we see a relief rally in the Usd if the report simply matches expectations. With interest rate markets looking for over 100bps worth of Fed easing between now and year end, an upbeat report may have the biggest impact.

The Fed's Goolsbee stated that the longer-run trend of labor-market and inflation data justify the Federal Reserve easing interest rate policy soon, and then steadily over the next year.

Usd/Jpy slipped to 142.06 in early European trade, but volatility remains a major factor, as the pair has recovered close to 143.00. A weak report would see the August 5th lows down at 141.70 come under scrutiny.

Overnight, Japan’s household spending missed expectations and rose just 0.1% y/y, adding to concerns that overall economic growth will stay tepid in Q3.

Meanwhile, ex BoJ board member Watanabe said that the central bank may hike interest rates faster than many currently anticipate and it should strive to better telegraph those moves to ensure markets don’t panic.

Eur/Usd's upside progress has been much more considered, with the pair improving upon yesterday's highs for the week of 1.1120 by a solitary pip in overnight trade, despite a very weak German IP update. IP in Europe's largest economy fell by 2.4% in July, much worse than the fall of 0.5% that was the consensus forecast.

Bbg reported that Republican presidential candidate Donald Trump pledged to cut the corporate tax rate, slash regulations and audit the federal government, embracing an idea proposed by billionaire backer Elon Musk, as he pitched his agenda to Wall Street and corporate leaders in New York.

Meanwhile the current Biden administration plans to impose export controls on critical technologies including quantum computing and semiconductor goods, aligning the US with allies working to thwart advancements in China and other adversarial nations.

The latest Emerson College National poll showed that democratic nominee Harris's lead has narrowed to 49% against the 47% for Trump.

Other data today includes the Canadian jobs update, where a rise of 25k is expected. The unemployment rate is expected to tick up again, to 6.5%, which would be the highest print since January 2022.

We should also hear from the Fed's Williams and Waller.

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