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What’s happening: The US dollar moved higher versus the Japanese yen and other major peers on Monday.
What happened: Investors assessed Friday’s mixed jobs data, which fuelled speculations of the US Federal Reserve announcing a smaller rate cut at the upcoming meeting than was earlier anticipated.
The USD/JPY recorded a gain for the first time in five days, while the greenback climbed against the euro for the second session in a row.
Why it matters: Traders are now fully pricing in a rate cut by the Federal Reserve at their upcoming meeting over September 17-18.
Earlier, there were growing speculations of a rate cut of 50 basis points (bps). The mixed NFP (nonfarm payrolls) report released on Friday sparked speculations of a smaller cut of 25bps. Markets continue to expect rate cuts of more than 100bps in 2024.
The NFP report showed lower job adds than market expectations, the unemployment rate eased in August. Wage growth remained strong, rising 0.4% to $35.21 in August, beating expectations of a 0.3% rise.
The USD/JPY forex pair gained sharply to reach 143.17 on Monday, after recording losses earlier in the month. The US dollar has lost around 2.1% versus the Japanese yen so far this month.
The greenback also recorded gains versus the euro, with the EUR/USD pair falling around 0.4% to 1.1037 on Monday.
The GBP/USD fell to 1.3076, to more than a two-week low, ahead of some major economic reports this week.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.4% to 101.55 on Monday.
What to watch: Investors now await the release of inflation data, due for Wednesday, which is expected to impact the outcome of the Fed’s upcoming meeting. The annual inflation rate in the US, which eased for a fourth straight month to 2.9% in July, is expected to decline further to 2.6% in August. Analysts expect the CPI to rise 0.2% in August, maintaining the same pace as the previous month.
Context: European equity markets started the week on a positive note, recording gains on Monday.
Details: The European Central Bank is scheduled to announce its policy decision on Thursday. Markets widely expect the ECB to cut interest rates by 25bps. Traders also expect a similar move by the ECB at its December meeting.
Markets also responded to earnings releases. Shares of Entain gained more than 5% on Monday, after the company reported upbeat online net gaming revenue growth for the second half of the year.
The STOXX Europe 600 Index gained 0.82% to close at 510.70 on Monday, with most sectors finishing the session in the green zone. Travel and leisure stocks were among the top performers, rising around 2.2%, while banking stocks rose about 1.2% during the session.
London’s FTSE 100 climbed 1.09% to settle at 8,270.84 on Monday, after recording losses for six straight sessions. Germany’s DAX 40 rose 0.77% to 18,443.56, while France’s CAC 40 added 0.99% to close at 7,425.26.
What to watch: With no major economic data from the Eurozone today, investors will watch the ECB’s policy decision this Thursday. The ECB, which held interest rates unchanged in July, is projected to announce a rate cut at this week’s policy meeting.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.20%, 1.16% and 1.30%, respectively.
Ukraine’s President Volodymyr Zelenskyy thanked Sweden for its plans to offer another package worth $445 million for its war with Russia. The news sent the RUB/USD lower in forex trading this morning.
Australia’s NAB business confidence index dipped to -4 in August, versus positive readings in the previous two months. The latest figure being the weakest since November 2023 exerted pressure on the AUD/USD forex pair.
The Philippines said its trade deficit had widened to $4.9 billion in July, from $4.1 billion in the year-ago month. This being the largest trade deficit since March 2023 sent the PHP/USD pair lower in forex trading this morning.
Argentina’s industrial production declined by 5.4% year-over-year in July, contracting for the 14th month in a row. However, the latest reading showed some improvement from the 20.1% plunge recorded in June, lending support to the ARS/USD forex pair.
US total consumer credit climbed by $25.45 billion in July, higher than market expectations of $12.5 billion, which sent the Nasdaq 100 higher by more than 1% on Monday.
UK’s unemployment rate, average weekly earnings growth, employment change, claimant count change and HMRC payrolls change, Spain’s industrial output, Turkey’s industrial production, jobless rate and labour activity rate, Italy’s industrial production, US NFIB small business optimism index, Redbook index and API crude oil stocks change, South Africa’s manufacturing production, as well as Brazil’s inflation rate.
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