The USD eases, oil prices are lower, equity markets are down, and US yields ease as markets focus on US Job data. Currency markets remain cautious heading into today's US Jobless Claims after last week's weaker-than-expected Nonfarm Payrolls report. The USD comes under pressure fresh selling against its G10 peers, and US Treasury yields dipped. Japan's TOPIX Index dropped back into the red on rate concerns, while European markets fell on weaker technology and mining shares. The expected divergence in US & Japanese central bank monetary policies is set to further impact the "Carry Trade," despite BoJ's assurance that they won't raise interest rates when financial markets are unstable. JPMorgan Chase CEO Dimond said he still believes that the odds of a "soft landing" for the US economy are around 35% to 40%, making recession the most likely scenario. Elsewhere, oil prices weaken after two days of gains, while Bitcoin rallies over 4%, and gold prices are flat. Today's focus will be on the Initial Jobless Claims, expected to be 240K vs 249K last week, to drive intraday direction to currency markets.
In other news, JPMorgan says three-quarters of global carry trades are now unwound. Catalan separatist leader Puigdemont returns to Spain despite an arrest warrant. Taylor Swift's concerts in Austria were canceled after a terror plot was uncovered. The BoC fears the jobs outlook may delay the consumer rebound. US consumer spending slowdown weighs on travel and leisure groups. Huge UK anti-racist rallies were held as far-right protests failed to materialize. Okanagan wildfire prompts evacuation orders and expands alerts. Canada confirms it pulled diplomats' kids out of Israel as fear of broader war builds.
In currency markets. Yen edges higher ahead of the US Jobless Claims data. GBP remains under pressure, holding near one-month lows, while CAD tests fresh two-week highs. Chinese Yuan continues to edge higher, trading 0.7% higher month-to-date. CNY is up by 0.1%, while Asian currencies strengthened by 0.2% on average against the USD. Trading currencies remain mixed, with NOK weakened by 0.7%, MXN & ZAR dipped 0.2%, NZD & SEK down 0.1%, JPY up 0.35%, and AUD & CHF gained 0.45% against the USD.
In commodity markets. Oil prices slipped by 0.5%, natural gas prices tumbled by 1.6%, gold prices are up by 0.2%, silver prices are down by 0.1%, copper & Soybean prices are flat, and wheat prices strengthened by 0.6%.
CAD edged higher against the USD, testing a fresh two-week high as markets consolidate ahead of the US Jobless Claims today. The US Commodity Futures Trading Commission showed that speculators have raised their bearish bets on the CAD to an all-time high. Shaun Osborne, chief currency strategist at Scotiabank, said, "The market is extremely short CAD, that should be a bit of a warning light on the dashboard that the CAD sell-off has possibly gone a bit too far." Intraday, the US jobs data will be the primary driver for the loonie today.
EURCAD holds steady at two-week lows as markets consolidate ahead of US jobs data, while slipping oil prices may support the euro.
EUR continues to hold above 1.0900 as investors await the US jobs data. Euro has been somewhat sidelined this week, holding within a 1.0900 - 1.0950 trading range unscathed from the carry-trade volatility. Domestically, with the lack of Eurozone data releases and the increasing risk-off sentiment, investors appear patient in holding existing euro positions. If we see a print in US jobless claims above 250k, it will likely revive fears of an increasing cooldown in the US labor market and could put further pressure on the USD, supporting the euro.
GBPEUR edges off two-month lows as investors are sidelined ahead of the US jobs data. The pound has dropped 2.5% month-to-date, while technically, a break of 1.1600 could open the potential for a retest of December lows of 1.1510.
GBP steadies near one-month lows against the USD, indicating a steadying of markets after a volatile week marked by the BoE's cut in its domestic interest rate and pressure on currency markets from the unwinding of the "carry trade." We anticipate the pound will remain vulnerable with the BoE in rate-cutting mode, combined with a global easing in risk sentiment. With the lack of UK economic data releases, investors will be focused on today's jobless claims to provide direction to the pound.
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