The question this week was always going to be whether the bid into US bonds would continue after last week’s US PMI misses. The answer has been a resounding ‘yes’ after a string of US data points that sent bonds higher, the USD lower, EURUSD higher, USDJPY lower, and lifted precious metals. Short-term interest rate markets now see 100bps in rate cuts coming from the Fed by November 2024 and a terminal rate at a rate of around 5.375% as a US economic slowdown looks imminent. Expect US growth and inflation data to remain in key focus for all of September.

Other key events from the past week

  • USD: JOLTs Job Miss, Aug 29: The Fed will be so pleased to finally see a weakening in the US labour market with 8.8 million jobs available vs. the nearly 9.5 million expected. Remember, weak jobs data is interpreted by the markets as the Fed needing to do less in terms of interest rate hikes.
  • USD: US inflation data, Aug 31: The print for the Fed’s preferred measure of inflation came in as expected with the core reading at 4.2% and the headline at 3.3%. Remember, big misses in US inflation prints can lift gold sharply higher.
  • USD: US labour market focus, Sep 1: This week saw a string of key US macro data misses. JOLTs jobs were missed, ADP jobs came in lower than expected, GDP for Q2 was revised lower and US consumer confidence dropped too. This makes Friday’s NFP all important. A big drop in jobs and watch out for more gold gains!

Key events for the coming week

  • CAD: Interest rate decision, Sep 06: The Bank of Canada is seen as having a greater than 70% chance of keeping rates unchanged next week. Note that retail positioning is heavily short USDCAD, so a surprise cut would launch USDCAD significantly higher. Don’t miss the BoC decision next week!
  • Seasonal Insights: Will GBPJPY sellers steal the show for September?
  • CAD: Canada’s Labour Market, Sept 8: The Bank of Canada is expected to keep rates unchanged next week, but keep an eye on Friday’s job data as it could change any forward projections the BoC gives on Wednesday.

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