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Markets:
- Gold down $2 to $2511
- US 10-year yields down 2 bps to 3.79%
- WTI crude down $1.26 to $71.92
- S&P 500 up 0.4%
- GBP leads, USD lags
Dollar weakness was the theme once again and this time it had some backing as the BLS revised down non-farm payrolls by 818K jobs for the year ending in March. There are good arguments that’s overstated but Goldman pegs the real loss at nearly half that, which is still a softer labour market and reason for the Fed to cut.
The FOMC added to that thinking as they highlighted a nearly-unanimous view on lowering rates. That sent the dollar to the lows of the day (and the year on a few fronts) Before a 25-pip rebound late on oversold conditions.
In terms of extremes, the euro cracked the December 2023 peak and the pound came within 50 pips of the 2023 high. USD/JPY got down to 144.50, which would have been the lowest close of the year save for a quick rebound to 145.18.
USD/CAD hit a four-month low that turned in part due to a possible Canadian rail strike tomorrow and growing calls for the BOC to be more aggressive.
AUD/USD still hasn’t finished recouping the July losses but it’s now close despite the rout in iron ore.
Overall, it’s tough to square up all the moves — strong stocks and bonds with a weak dollar — but it paints a picture of an early-cycle economy, at least outside of the five-day rout in oil. But maybe we’re overthinking an August market and this is all repositioning ahead of Powell.