The Morning Update

The USD weakens, oil prices slip, equity markets rally, and US yields ease ahead of the key jobs report. The U.S. dollar is easing ahead of Friday’s jobs report as markets nearly fully price in a September Fed rate cut and debate the chance of another in October. A soft payrolls print would cement the dovish outlook, while a strong surprise could briefly lift the dollar, but is unlikely to derail expectations of easing. Global equities advanced ahead of today’s U.S. jobs report, with S&P 500 futures up 0.2% after a record high, Nasdaq futures gaining 0.5%, and Europe’s Stoxx 600 rising 0.2%, while Broadcom surged on an AI chip pact with OpenAI. Investors are betting the data will support Fed easing without signalling economic weakness, though a surprise could quickly jolt markets. “Today’s release is unlikely to show the kind of pronounced weakness that would force the Fed to accelerate its easing plans,” wrote Max McKechnie, global market strategist at JPMorgan Asset Management. “Instead, investors should focus on the unemployment rate and wage growth for a clearer sense of the Fed’s next steps.” August payrolls are projected to rise by roughly 75,000, extending a four-month streak of job growth below 100,000. The unemployment rate is seen climbing to 4.3%, the highest since 2021. Elsewhere, gold heads for its best week in three months, oil heads for its first weekly loss in three as supply concerns grow, and Bitcoin rallies 2% to $112,175. In focus today, CAD unemployment and net change in employment, US Nonfarm Payrolls, Average Hourly Earnings and the Ivey PMI will help drive intraday direction for currency markets.

‍

In the news. Trump signs an order to bring lower Japanese auto tariffs into effect. China slaps preliminary duties on EU port imports. Japan's real wages and consumer spending climb, but inflation challenges persist. Work paused at Hyundai's US site after hundreds of workers were detained in a raid. The US Justice Department launches a criminal probe into Fed's Lisa Cook. Thai tycoon who backed cannabis elected PM. Macron says Trump to outline Ukraine security guarantees in days. The TSX ends higher for the seventh straight day as tech shares climb. Canada to unveil promised aid for aluminum and canola sectors soon.

‍

In currency markets. The yen firmed in today’s session as investors welcomed signs of easing trade tensions, with reports pointing to delays in U.S. tariffs on Japanese goods. Broader currency markets were steady, with the euro and sterling holding modest gains against the dollar. In contrast, commodity-linked currencies were mixed as traders awaited fresh direction from U.S. jobs data and next week’s central bank decisions. CNY is flat, while Asian currencies firmed by 0.1% on average against the USD. Trading currencies rebounded, with KWD flat, JPY, CHF, and PLN up 0.2%, MXN, CHF, NZD, NOK, and DKK firmed 0.25%, AUD, CZK & ZAR gained 0.35%, and SEK & NZD strengthened by 0.45% against the USD.

‍

In commodity markets. Oil prices slipped 0.1%. Natural Gas prices rallied 0.8%. Gold and silver prices are flat. Copper and Wheat prices rallied 0.6%, and Soybean prices firmed by 0.25%.

‍

CAD firmed in early trading, rebounding from its weakest level since late August, as investors pared dollar positions with markets widely anticipating a Fed rate cut on September 17. Canada’s services sector contracted for a ninth straight month, while domestic jobs data today is expected to show just 10,000 new positions and unemployment rising to 7%, alongside the release of U.S. Nonfarm Payrolls. With Canadian yields at two-month lows, investors see a 65% chance of a BoC cut this month, keeping the Ivey PMI and labour market data firmly in focus.

‍

EUR/CAD held steady as traders awaited Friday’s Eurozone GDP and Canadian jobs data, with forecasts for weak employment and higher unemployment likely to shape Bank of Canada rate expectations.

‍

EUR gained ground against a softer U.S. dollar as investors positioned ahead of Friday’s Eurozone GDP and employment reports, which are expected to shed light on the region’s growth and labour outlook. Sentiment was also shaped by anticipation of the U.S. Nonfarm Payrolls release, with markets looking for confirmation of a cooling labour market that could cement Fed rate cut expectations. Together, these data points are likely to set the near-term direction for EUR/USD, with the euro supported by dollar weakness but still vulnerable to growth concerns within the eurozone.

‍

GBPEUR held steady after UK GDP showed modest growth, while Eurozone GDP confirmed slowing momentum in the bloc. Eurozone unemployment also eased slightly to 0.6% year-on-year in Q2 from 0.7%, pointing to a modest improvement in labour conditions.

‍

GBP traded firmer as sterling found support from stronger UK retail sales and steady Halifax house price data, which suggested consumer demand and housing market resilience despite ongoing fiscal and rate concerns. On the U.S. side, investors are focused on upcoming average hourly earnings and Friday’s Nonfarm Payrolls, with markets looking for confirmation of a softer labour market that would reinforce expectations of a September Fed rate cut.