North American FX Open - Markets fearful of NFPs release

The souring of risk sentiment has continued overnight, after yesterday's disappointing US ISM report and the collapse in its employment component. The Nikkei fell by almost 6% and European equity markets are a sea of red. US equity futures point to further sizeable losses at the open, after Intel plunged 19% post-market, as its Q3 revenue forecast missed and it suspended its dividend on top of announcing plans to cut 15% of jobs, while Amazon slid almost 7% as AI spending posed a challenge to its outlook.

Usd/Jpy has come under pressure again overnight, with a low so far of 148.63, just shy of yesterday's four and half month low down at 148.63. The Dollar overall is also a bit softer, with safe haven demand not enough to cancel out the selling on worries the Fed is behind the curve.

Japan's Finance Minister Suzuki told reporters recent FX moves have had both good and bad effects, with sudden FX moves increasing uncertainty for businesses. Suzuki added that it is important for the FX market to reflect fundamentals and move stably.

Also, ex-BOJ Momma stated the central bank's big policy shift this week makes another interest rate hike highly likely in October and raises the potential for quarterly increases.

The Swiss CPI report for July matched expectations, with the headline y/y rate remaining at 1.3%, while the core rate was also unchanged from June at 1.1% y/y.

The strength of the Franc has meant that the Swiss OIS curve is implying an ever increasing amount of rate cuts, with two more moves expected this year and even the chance of a larger move than 25bps in September. It looks almost guaranteed that the SNB will cut rates at every one of its meetings this year.

Attention now turns to what feels like a crucial US NFPs print. A rise of 175k is the consensus forecast, with the unemployment rate expected to remain at 4.1%.

There is a sense that even if we see a solid release, we might not see a hugely positive market reaction, because the concerns about how the labor market develops in coming months are now widespread.

US factory orders for June are also set for release, while should hear from the Fed's Goolsbee and the BoE's Chief Economist Pill, after yesterday's first rate cut of the cycle. Remember Pill was one of the MPC who voted to keep rates unchanged at 5.25%.

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