Over the month of August, there has been a mixed picture for the US economy. Yes, the last NFP showed jobs being added to the US economy at the second slowest rate this year, but the average hourly earnings were still high and the unemployment rate was still low. The US jobs market is still ‘tight’ although not as tight as it has been.

The last CPI print for July from the US still shows the core reading double the Fed’s target at 4.7% y/y.

So, markets have taken a look at this over August and started to think that perhaps rates are going to be higher for longer. This has lifted yields higher, sent the USDJPY higher into BoJ intervention territory (above 145), and been a headwind for silver and gold. Investors are concerned that rates will need to stay higher for a longer period of time than previously expected.

All eyes on the FOMC minutes

This evening the FOMC minutes will be released and investors will be reading them to look for any clues as to how long the Fed will take before cutting rates. Short-term interest rate markets are currently seeing the first rate cut coming from the Fed around May next year and September’s rate meeting is seen as a hold. In fact, short-term interest rate markets are not seeing any further hikes from the Fed this year.

So, a key market to look at tonight will be the USDJPY and gold. If the minutes show that the Fed is considering cutting rates next year and the minutes contradict a ‘higher rates for longer’ message that should send yields lower, send the USD lower, and lift gold while pressuring the USDJPY to the downside.