USD mixed amid weak risk appetite – Scotiabank
|Risk aversion remains a key feature of markets after hefty losses for US stocks yesterday suggest the August rebound may have peaked around the high seen in July. European stocks have dropped around 1% so far today and US equity futures are in the red, led by tech. Recall that, seasonally, September is the worst month of the calendar year (over the past 25 years) for the S&P 500, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD mixed versus majors as global stocks drop again
“The FX market is trading in (mostly) risk-off mode; the JPY and CHF are outperformers among the majors again but so is the ZAR (on better economic data). The USD is mixed to slightly lower, however, as markets continue to mull Fed easing risks. ISM Manufacturing data suggested slowing US growth momentum (paring back the Atlanta Fed’s GDPNow estimate to 2.0%).”
“Markets are pricing incrementally more risk of a 50bps cut (about 40% priced in now) but payrolls data at the end of the week is still the key determinant of the Fed policy outlook. Today’s JOLTS data is expected to reflect some softening in the US labour market. More focus on weaker employment trends in the Fed’s Beige Book may bolster the perception that the bar to a 50bps Fed cut on September 18th is relatively low.”
“Japan releases labour cash earnings data tonight. July data may slow somewhat relative to June’s 4.5% rise but the trend in strengthening pay growth will support the outlook for modest BoJ tightening ahead. The DXY is nearing short-term range support at 101.55; losses may extend towards 101 on losses below here.”
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