The USD is steady, oil prices edge higher, equity markets gain, and US yields are mixed on improving risk sentiment. Currency markets hold steady, while equity markets advance following cautious comments from central bankers at Jackson Hole and China's support measures for its equities markets helped boost global risk sentiment. Investors found confidence in Fed Chair's speech on Friday after Powell stressed that the central bank would "proceed carefully", guided by economic data. ECB President Lagarde on Friday also said the ECB would set borrowing costs as high as needed to keep inflation in check, but maintained a less hawkish tone. In focus this week, today sees a light economic docket. Tuesday US Consumer Confidence & Jolts Job Openings. Wednesday Spain inflation data, EUR Consumer Confidence, EUR Economic Sentiment Indicator, EUR CPI, US ADP Employment Change, US GDP, China Manufacturing PMI. Thursday German Retail Sales, ECB CPI, US Core Personal Expenditures & China caixin Manufacturing PMI. Friday US Average Hourly Earnings, US Nonfarm Payroll, US Manufacturing PMI, CAD GDP & Global Manufacturing PMI.
In other news. China announces measures to boost markets. China Evergrande loses $2bln in value as trade resumes. Foxconn founder Terry Gou announces run for Taiwan presidency. The US will not compromise with China on national security, says commerce secretary-FT. Japan suspects H-IIA rocket launch for moonshot because of strong winds. Ukraine says it liberates strategic southeastern settlement of Robotyne. Japan says harassing calls from China over Fukushima water 'extremely regrettable'. Heavy rains and floods inundate China; Hunan provinces have recorded rain, and thousands have evacuated.
In currency markets. Currency markets hold steady in early trading with a light economic docket today as investors shift focus to US NFP Friday. China Yuan slips despite PBOC's strong daily fixing as economic concerns persist. GBP stalls near 10-week lows as BoE rate hike expectations ease. CNY & Asian currencies slipped 0.1% on average vs. USD in early trading. Trading currencies are mixed in thin trading with ZAR weakening 0.55%, NZD & JPY down 0.1%, while NOK & MXN are flat, AUD & CHF are up 0.1%, SEK strengthens 0.25% vs. USD.
Oil prices edge higher as China took steps to help boost its stalling economy and as tropical storm Idalia is expected to hit Florida as a hurricane. CAD stalls near its 3-month lows from ongoing flagging China growth, domestic headwinds with labor disputes, ongoing wildfires impacting growth, and the hawkish Fed tones from Powell's Jackson Hole speech. Investors will be focused on Friday's CAD key GDP and manufacturing PMI to help provide direction on BoC's longer-term direction on interest rates. Intraday we expect to see the CAD steady near current levels with the lack of economic data releases today.
EURCAD gains in early trading after ECB Lagarde Friday's speech didn't take as dovish of a tone as investors had anticipated.
Euro steadies near 1.0800 as markets continue to digest comments from the ECB & Fed on Friday. The Euro consolidated around 1.0800 after posting losses for six weeks as markets take a breather with the lack of economic data today. On Friday ECB President Lagarde didn't offer fresh insight on the central bank's longer-term policy outlook. Lagarde said later Friday that the ECB will set interest rates at "sufficiently restrictive levels for as long as necessary" to ensure price stability. This week sees a slew of Eurozone and US economic data which will help direction this week.
GBPEUR continues to slip as expectations that the BoE is likely to limit future rate hikes to 25bps in 2023 down from 75bps after easing inflation levels and weaker growth expectations.
GBP stalls below 1.2600 amid fresh USD buying and light GBP trading with the UK bank holiday. The pound continues under pressure on the combination of a less hawkish BoE and ongoing demand as investors shake off China's policy support measures. The pound tested 1.2550, its lowest level since mid-June with the Fed maintaining its hawkish tone, while the BoE is seen to have adjusted to a dovish tone with many analysts downsizing BoE rate hikes from 3 to 1 in 2023. We expect the pound to stall within its current range with the lack of US data, and the absence of UK traders with the UK holiday today.
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