• USD net G10 short grew by $8.4bn in the Aug 28-Sep 3 IMM period; $IDX +1.14%

• Fed policy key for moves; -25bp Fed in Sept baked in, -50bp still debated

• EUR$ -1.24%, specs +7,180 contracts now +100,018 on lwr Fed rate view

• $JPY +1.09%; specs *15,248 contracts now +41,116 on Fed-BoJ rate convergence

• GBP -1.07% specs +18,147 contracts, now 108k; Fed-BoE rates widen in 24/25

• $CAD +0.82%; specs +41,458 contracts, now -68,544; short -65% since Jul 30

• AUD$ -1.21%; specs +11,295 contracts, -7,864; less dovish RBA attracts AUD buyers

The dollar, along with other haven currencies, rose Friday as markets pared expectations of an aggressive Fed rate cut in September following the August jobs report and U.S. central banker comments, sending shares and commodity price tumbling.

The dollar index rose about 0.3% with the greenback gaining against most of its G-10 and emerging market peers; the yen briefly posted a one-month low as the risk tone soured.
USD/JPY was on pace for its lowest close since early January.

Nonfarm payrolls rose 142K, below the Reuters median forecast of a 160K, and the July figure was revised down to 89K from 114K.

The unemployment rate held steady at 4.2% while the annual pace of hourly earnings quickened to 3.8%.

New York Fed President John Williams said it is “now appropriate” to be less restrictive though data will determine the future pace of easing.

Fed Gov.
Christopher Waller said he sees a case for front-loading rate cuts if data supports, adding that the current batch of data requires action.
Comments precede U.S. inflation data next week.

Pricing shows a 73% chance the U.S. central bank will lower its 5.25%-5.50% policy range by 25 basis points in two weeks while odds are 27% chance for a 50bps cut, down from 45% pre-NFP.

Canada's unemployment rate edged up to 6.6% in August and a below-consensus 22.1K jobs were added, increasing expectations of additional rate cuts following a 25bp reduction this week.

U.S.
Treasury yields eased about 1-7bp across maturities in a bond rally led by the front end, which steepened the 2s-10s curve nearly 6.36bp, according to LSEG data.

By New York afternoon trade, the S&P 500 had fallen 1.69%.

WTI tumbled 2.27% amid global growth concerns, bringing the weekly loss to about 8%.

Copper fell 1.67% amid broadly lower metals prices.

Gold fell 0.84%, retreating from near-record level reached earlier in the session.

Heading toward the close: EUR/USD -0.24%, USD/JPY -0.74%, GBP/USD -0.36%, AUD/USD -1.03%, DXY +0.21%, EUR/JPY -1.47%, GBP/JPY -1.09%, AUD/JPY -1.75%, USD/CAD +0.42%.

For more click on FXBUZ

• NY opened near 0.6735 after a tight range traded in the overnight session

• Pair spiked up to 0.67675 after Aug payroll as yields US2YT=RR, US$ fell

• Rally reversed though as probability Fed would cut 50bps in Sept dropped

• Remarks from Williams, Waller, Goolsbee didn't indicate 50bps cut is due

• Risk soured; stocks ESv1, commodities XAU=HGv1 fell, USD/CNH rallied

• Yen buys sank AUD/JPY toward 94.80; US yields remains lower on the session

• AUD/USD fell below the 10- & 21-DMAs and pierced the 55-DMA, hit 0.6660

• Daily bearish engulfing formed, reinforced bearish signals from falling RSIs

• China Aug. PPI, CPI & trade balance are data risks to begin next week

• For more click on FXBUZ

Synopsis:

Danske anticipates a limited reaction in EUR/USD to the ECB's expected 25bp rate cut on September 12. The primary focus will be on the ECB's communication, particularly regarding future rate paths and the October meeting.

Key Points:

• ECB Rate Cut:

  • Expected Action: Analysts and markets expect the ECB to deliver a 25bp rate cut.
  • Economic Context: The ECB’s decision is supported by moderation in the labor market and economic activity, along with a slowdown in wage growth.

• FX Reaction:

  • Limited Movement: Given that the 25bp cut is fully priced in, a notable reaction in EUR/USD is not anticipated.
  • Communication Focus: The key will be the ECB's communication, especially hints regarding future rate paths and the October meeting.

• Future Considerations:

  • FOMC Meeting: The upcoming FOMC meeting on September 18 is expected to have a more significant impact on EUR/USD direction in the near term.

Conclusion:

Danske expects minimal movement in EUR/USD following the ECB's anticipated 25bp rate cut, with attention shifting to the ECB's communication on future rate paths. The FOMC meeting later in September is likely to play a more pivotal role in determining the near-term direction of EUR/USD.

Corrects typo in signoff

• USD/JPY posts fresh session low of 141.750 on EBS as Treasury yields slide following Fed Waller comments about needed policy action

• Drop puts the 141.675 Aug. 5 low within spitting distance though downward momentum slows as London close comes into view

• Close below lower Bollinger of 142.55 threatens to disrupt an otherwise orderly post-NFP trading range heading into data next week

• One-month implied volatility now 12.56% after basing at 12.25%

• Yen is also buoyed against high-beta peers as growth concerns weigh on risk-sentiment

For more click on FXBUZ

Synopsis:

ANZ maintains a negative outlook on the EUR, citing weak manufacturing data and global demand concerns, while expecting the GBP to remain firm despite a potential risk-off sentiment. Upcoming economic data will influence short-term currency movements.

Key Points:

• EUR Outlook:

  • Negative View: ANZ retains a bearish stance on the EUR, driven by weak Eurozone manufacturing data and ongoing global demand issues.
  • Factory Orders: The June increase in German factory orders was largely due to one-off large orders, masking an underlying decline.
  • Support on Crosses: The EUR may find short-term support against risk-sensitive currencies like the AUD and NZD but weaken against safe-haven currencies like the JPY and CHF.
  • ECB Impact: A 25bp rate cut by the ECB is expected and already priced in by the market, which may overshadow its short-term effects on the EUR.

• GBP Outlook:

  • Firm Performance: The GBP has remained resilient despite a risk-off environment.
  • Upcoming Data: Key focus will be on July’s wages and employment data. Persistent wage growth in sectors like finance and public services has been a key concern for the BoE.
  • Labour Market Trends: Cooling in the labour market is expected, with rising jobless claims and lower employment growth expectations.
  • Currency Momentum: Despite potential weaker labour data, GBP is expected to hold firm, particularly against the EUR, due to strong growth fundamentals. However, risk-off sentiment might favor the EUR slightly in the near term, potentially causing some upside in EUR/GBP.

Conclusion:

ANZ's outlook suggests continued weakness for the EUR due to poor manufacturing data and global demand concerns, while the GBP is expected to remain robust despite risk-off sentiment. The upcoming economic data, particularly on wages and employment, will be crucial for short-term GBP movements, with potential near-term EUR/GBP upside.

• Cable hits 1.3166 after drop from 1.3238 (highest level since Aug 28)

• Drop influenced by Fed expectations taking a less dovish turn

• Probability of 50 bps Fed cut on Sept 18 down to 43%, from 57% high earlier

• FEDWATCH. 1.3145 was GBP/USD knee-jerk low after US jobs report release

• 1.3160-1.3192 was pre-NFP data range (1.3152-1.3185 was Thursday's range)

• Fed's Williams: moving in right direction but not yet there on 2% inflation

Synopsis:

BofA anticipates a 25bp rate cut from the ECB next week, but expects the central bank to maintain a relatively hawkish stance despite weaker Eurozone data compared to the US. The ECB is expected to stick to its data-dependent approach and meeting-by-meeting strategy.

Key Points:

• Rate Cut Expectation: BofA forecasts a 25bp rate cut from the ECB, which is fully anticipated by the market.
• Tone and Approach: Despite the cut, the ECB is expected to maintain its cautious tone, emphasizing data-dependence and a meeting-by-meeting approach.
• Core Inflation: Core inflation, particularly in services, remains persistently high.
• Unemployment Rate: The unemployment rate in the Eurozone remains at an all-time low.
• Internal Discussions: There are risks of a more dovish stance due to weakening growth and internal ECB discussions, but this is not expected to match the dovish tone of the Fed.

Conclusion:

BofA predicts that while the ECB will deliver a rate cut next week, it will likely adopt a relatively hawkish tone compared to the Fed. The central bank’s cautious approach reflects ongoing concerns about sticky core inflation and low unemployment, despite the weaker growth outlook.

Synopsis:

CIBC analyzes the US and Canadian August jobs reports, noting a cooling labor market in the US and a mixed performance in Canada. The reports highlight different trends in employment growth, wage increases, and unemployment rates, influencing the outlook for future monetary policy.

Key Points:

US Jobs Report:

• Employment Growth: Increased by 142k, falling short of the 165k forecast. July payroll gains were revised down to 89k.
• Three-Month Average: Payroll gains averaged 116k, slightly above long-run break-even estimates.
• Unemployment Rate: Fell to 4.2%, in line with expectations.
• Participation Rate: Stable at 62.7%, with strong prime-age participation at 83.9%.
• Wage Growth: Rose by 0.4% m/m, exceeding expectations.

Canada Jobs Report:

• Employment Change: Rose by 22k, close to the forecast but primarily in part-time jobs (+65k), with full-time positions declining.
• Jobless Rate: Increased to 6.6%, higher than the 6.5% forecast due to a larger rise in the labor force (83k).
• Hourly Wages: Increased by 4.9% YoY, showing deceleration but remaining high. Other wage measures also indicate broader deceleration.

Conclusion:

The US jobs report presents a mixed picture with slower employment growth and rising wages, creating uncertainty for the Fed's future policy decisions. In Canada, a softer job market and rising unemployment suggest continued steady interest rate cuts by the Bank of Canada. Both reports underscore the need for careful monitoring of labor market trends and their implications for monetary policy.

• FX option flows have seen strong demand for post NFP USD put options

• That demand has lifted topside over downside strike premiums in EUR/USD

• Sub 1-month expiry risk reversal contracts regain USD put vs call premium

• Benchmark 1-month expiry 25 delta risk reversal trades 0.15 for USD puts

• Reached 4-year high 0.4 late Aug, but quickly returned to favour USD calls

• Outright demand for short dated expiry USD puts noted - strikes to 1.1200+

• Overnight expiry options hold biggest NFP FX volatility risk premium in 2024

• Recent price action suggests NFP miss could see biggest FX reaction

• Related comment nL1N3KG09E

For more click on FXBUZ

If the Swiss national Bank continues to unwind its massive holdings of foreign currencies then EUR/CHF might collapse.

Without intervention to support the pair, which is not possible if Swiss reserves are to be further reduced, then there is a strong chance that EUR/CHF - which is entrenched in a downtrend that has endured since the global financial crisis in 2008 - drops further.

The cross has reached a critical point beyond which any drop should see EUR/CHF retest the all-time low at 0.8500 and there has been a recent sell signal when 55-DMA fell below the 200-DMA - Death Cross.

The critical point for EUR/CHF at 0.9250 was tested in December 2023 and this August and the SNB opted to support the pair both times.

If reserves are to be reduced this cannot continue, and with over 300 billion of foreign currencies sold in a short period since November 2021, it seems that Switzerland wants rid of its enormous stockpile of foreign cash.

Without official support EUR/CHF could drop toward the next major target for the trend at 0.7841.

Risk aversion stemming from China could stoke demand for the franc.

For more click on FXBUZ

• Demand for 1-3-month expiry 140.00 options before this weeks USD/JPY drop

• They have increased in value amid lower spot/higher implied volatility

• However, traders have since lowered strikes and shortened expiries

• Solid demand for sub 1-week expiry sub 140.00 strikes nL1N3KN0JM

• Volatility could increase significantly if 140 option barriers breached

• Highest FX volatility risk premium for US jobs data in 2024 nL1N3KO06W

• USD put option demand suggests biggest FX reaction if data misses/USD drops

For more click on FXBUZ

• EUR/USD found support at 1.1026, on Tuesday, before rebounding

• There is scope is for bigger gains in coming sessions to a major 1.1160 Fibo

• 1.1160 Fibo is a 76.4% retrace of the 1.1201-1.1026 (Aug-Sept) EBS fall

• Spot failed under the 1.1060 Fibo, setting up a bear trap: which is bullish

• 1.1060 Fibo, is a 23.6% retrace of the 1.0602-1.1201 (April-August) EBS rise

• A bear trap is set when a market breaks below a tech level but then reverses

• EUR/USD Trader TGM2334. Previous update nL1N3KN08V

• Medium-term USD/JPY chart is bearish, 14-week momentum is negative

• Spot well below the 144.59 Fibo, weekly close below would be very bearish

• 144.59 Fibo is a 50% retrace of the 127.22-161.96 (2023-2024) EBS rise

• Downside targets include the 140.49 Fibo, 61.8% of the same 2023-2024 rise

• Spot could also drop to probe the 140 psychological level

• USD/JPY trader TGM2336. Previous update nL1N3KN089

• Cable has traded an 11 pip range thus far Friday; 1.3172-1.3183

• 1.3183 is 2.5 pips shy of Thursday's September high (1.3088 = Sept low)

• US jobs report due at 1230 GMT: NFP f/c 160k; jobless rate forecast at 4.2%

• GBP/USD might jump towards 1.3269 if US jobless rate is higher than expected

• 1.3269 was 29-month high last week (Aug 27). 1.3200 was Aug 30 high

• Yellen says US labor market healthy despite slower hiring pace nL1N3KN12I

• Slipped 0.15%, trading at the base of a 0.6730-0.6743 range - busy early

• Base metals eased and stocks are mixed in Asia - caution into US jobs

• Soft US jobs, will spark 50pt Fed cut expectations for September 18th

• The RBA's hawkish stance should provide a positive environment for the AUD

• Charts, 21-day Bolli bands contract, 5, 10, and 21-day moving averages coil

• Daily momentum studies crest - mixed signals as the uptrend hangs in

• Wednesday's 0.6749 high then Tuesday's 0.6792 top are initial resistance

• Close below the 0.6715 21-DMA and Wednesday's 0.6685 base would be bearish

For more click on FXBUZ

• Steady in an occasionally busy 1.3174-1.3183 range on LSEG FX Matching

• Mixed markets in Asia ahead of the potentially pivotal US payrolls

• There is no tier one UK data or BoE events - USD and risk to lead gbp

• Report says UK needs an extra $1.3 tln investment to spark economic growth

• Charts - 5, 10 & 21 daily and weekly moving averages head higher

• 21-day Bolli bands contract, momentum studies flat line - positive setup

• Last Friday's 1.3200 top and last week's 1.3269 high are first resistance

• A close below 1.3038, 38.2% April/August rise would end the topside bias

  For more click on FXBUZ

Synopsis:

BofA forecasts solid job growth for August, with nonfarm payrolls expected to rise by 200k. They anticipate declines in the unemployment rate and labor force participation rate, alongside moderate increases in earnings and hours worked.

Key Points:

1. Job Growth Expectations:

   • Nonfarm Payrolls: Forecasted to increase by 200k, up from 114k in July. This includes a 30k rise in public sector hiring, driven by local employment, and a 170k increase in private payrolls.
   • Sector Highlights: Robust hiring is expected in education and healthcare.

2. Unemployment and Participation Rates:

   • Unemployment Rate: Expected to decline by 0.1pp to 4.2%.
   • Labor Force Participation Rate: Anticipated to decrease by 0.1pp to 62.6%.

3. Earnings and Hours Worked:

   • Average Hourly Earnings: Forecasted to rise by 0.3% m/m.
   • Average Weekly Hours: Expected to increase to 34.3 hours.

Conclusion:

BofA predicts a strong jobs report for August, with significant payroll gains, slight decreases in unemployment and labor force participation rates, and moderate increases in wages and hours worked.

• Off 0.1%, capped by cautious sentiment in Asia ahead of US jobs

• ASX 200 +0.1%, Nikkei -0.35%, AsiaxJP flat Nasdaq E-mini -0.9%

• US jobs data likely pivotal for a 25pt or 50pt Fed September cut

• The RBAs hawkish tone Thursday should provide underlying AUD support

• Charts, 21-day Bolli bands contract, 5, 10, and 21-day moving averages coil

• Daily momentum studies crest - mixed signals as the uptrend hangs in

• Wednesday's 0.6749 high then Tuesday's 0.6792 top are initial resistance

• Close below the 0.6715 21-DMA and Wednesday's 0.6685 base would be bearish

For more click on FXBUZ

• Flat early after closing after closing off 0.2% with the US dollar up 0.2%

• There is no tier on UK data of BoE events so the USD and risk to lead GBP

• Britain needs extra $1.3 trillion investment for economic growth - report

• After years of UK under-investment, the Starmer gov't faces tough decisions

• Charts - 10 & 21 daily and weekly moving averages head higher, 5 DMA slips

• 21-day Bolli bands contract as momentum studies flat line - uptrend holds

• Last Friday's 1.3200 top and last week's 1.3269 high are first resistance

• A close below 1.3038, 38.2% April/August rise would end the topside bias

For more click on FXBUZ

• Steady after closing up 0.25% with the USD off 0.2% as UST yields eased

• Yield spreads tightened, 10yr bund -1bp 2.208%, 10yr UST -4bp 3.725%

• ECB expected to cut 25bp next week and in Dec - uncertainty for 2025

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

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

• Well tested 21 DMA proved resilient this week - key technical support

• A close above the 1.1100 21-DMA suggests the uptrend is back for next week

• 1.1100 1.415BLN, 1.1125 569mln and 1.1150 1.609BLN close strikes for Sep 6th

  For more click on FXBUZ

• Steady early after closing up 0.25% with the U.S. dollar off 0.2%

• Thursday's RBA Governor Bullock's hawkish outlook changed expectations

• RBAWATCH prices a Dec 10 cut at 13.8bp from 21.27bp at last Friday's close

• The RBAs stance is contrary to the dovish Fed and ECB - should support AUD

• Charts, 21-day Bolli bands contract, 5, 10, and 21-day moving averages coil

• Daily momentum studies crest - mixed signals as the uptrend hangs in

• Wednesday's 0.6749 high then Tuesday's 0.6792 top are initial resistance

• Close below the 0.6715 21-DMA and Wednesday's 0.6685 base would be bearish

For more click on FXBUZ

Synopsis:

Danske anticipates a 25bp rate cut by the ECB at its September 12 meeting, with a cautious outlook and a flexible approach to future rate adjustments.

Key Points:

1. Rate Cut Anticipation:

   • Expected Move: The ECB is expected to cut rates by 25bp. This decision is supported by recent moderation in the labor market and economic activity since the June meeting, which aligns with the ongoing disinflationary trend and slowdown in wage growth.

2. Policy Guidance:

   • Approach to Future Cuts: ECB President Christine Lagarde is expected to signal a shift towards a more measured approach but without committing to specific timing for additional rate cuts. The ECB is likely to maintain a meeting-by-meeting, data-dependent stance, preserving flexibility in its policy guidance.

3. Projections and Focus:

   • Staff Projections: The updated September staff projections are anticipated to be largely unchanged. Key areas of focus will include projections on wages, productivity, and inflation to assess the applicability of 'Lane’s formula' in guiding future policy.

Conclusion:

Danske forecasts a 25bp rate cut by the ECB, with a cautious and flexible approach to future adjustments. Market attention will be on updated projections and how they influence the ECB's policy stance moving forward.

The dollar index fell for a third day Thursday, tracking Treasury yields lower in the run up to U.S. jobs data Friday amid fresh signs the US labor market is softening.

The ADP payrolls estimate of 99k was much weaker than street estimate of 145k though analysts tended to downplay the link between ADP and NFP.
Challenger layoffs rose to the highest level in five months.

The dollar trimmed a steeper decline amid bouts of short-covering following a modest improvement in weekly jobless claims and stronger than expected August service PMIs.

Levels of overnight volatility remain elevated ahead of the U.S. employment report with yen just below 30%.

In politics, Republican presidential candidate Donald Trump said he would establish a government efficiency commission headed by billionaire supporter Elon Musk if he wins the Nov.
5 election and French President Emmanuel Macron appointed Michel Barnier, the EU's former Brexit negotiator, as his new prime minister on Thursday.

The latest Bank of England Decision Maker Panel survey (DMP) showed price pressures continue to ease with one-year and three-year inflation expectations remaining at 2.7%.

U.S.
Treasury yields eased 1-3bp across maturities, according to LSEG data, with the 2s-10s curve flattening nearly 1bp to a barely inverted -1.74bp at the mid.

By New York afternoon trade, the S&P 500 had fallen 0.13%.

WTI slipped 0.30%, reversing earlier gains following a much larger-than-expected withdrawal from U.S. inventories and a two-month delay to output increases by OPEC+ producers.

Copper was up 1.31% amid broadly higher metals prices.

Gold rose 0.86% fueled by the weaker dollar, lower yields and concerns that an Israel-Hamas ceasefire deal was not near.

Heading toward the close: EUR/USD +0.18%, USD/JPY -0.21%, GBP/USD +0.17%, AUD/USD +0.14%, DXY -0.24%, EUR/JPY -0.01%, GBP/JPY -0.06%, AUD/JPY -0.09%, USD/CAD +0.01%.

For more click on FXBUZ