US JOLTS job openings feature the economic agenda today

KBC Market Research Desk KBC Bank

Markets

Curve steepening was the name of the game yesterday. Higher risk premia (public finances) drove the underperformance at the long end of the curve in which the UK, as usual, took the lead. Its 30-year maturity hit the highest level since 1998. German and European (swap) rates joined the move higher, to a 14-year high and the 3% mark respectively. Japan’s 30-year yield gauge rose 2.7 bps and extends the rise this morning by adding 7 bps ahead of tomorrow’s auction. It is now trading at its highest level since inception in 1999. Treasuries slightly outperformed, with yields adding between 2.2 and 3.6 bps. They pulled back from their intraday highs in early US dealings and in the wake of the August US manufacturing ISM. The headline figure printed near consensus (48.7 vs 49 expected) and new orders rose (51.4) for the first time since January this year. The employment component, though, remains deeply mired in contraction territory. The 43.8 outcome was lower than expected (45) and among the weakest since the Covid recession. It reveals markets’ sensitiveness for any data points related to the labour market. Stock markets ended with losses and the greenback dominated the FX landscape. DXY advanced to 98.4, EUR/USD depreciated to 1.164, down from 1.171 at the open. The yen suffered not only from fiscal risks but (not totally unrelated) political ones as well after a key figure tendering his resignation sparked speculation for early party elections. USD/JPY tested the 200dMA around 148.9 and sticks around in today’s Asian session. Sterling was an obvious underperformer, most notably against the dollar. GBP/USD tumbled from 1.355 to 1.34 with follow-up losses this morning to 1.336.

US JOLTS job openings feature the economic agenda today. Though the indicator is lagging most other labour market gauges (July vs August readings), it could still trigger some intraday volatility. Tomorrow and Friday is the real deal though, with the ADP job report, services ISM and payrolls coming up. ECB’s Lagarde speeches at the European Systemic Risk Board’s conference, probably without touching on monetary policy. The Fed releases its Beige Book, kickstarting its FOMC September cycle. The US administration meanwhile plans to go to the Supreme Court today for an expedited decision on last Friday’s US Court of Appeals ruling on Trump’s reciprocal tariffs. Its outcome serves as a wildcard but probably shouldn’t be expected for the very near future. Short term, we’re looking for the public finances narrative to keep upward pressure on long-term yields and add to the steepening move. The 30-year (4.98%) in the US nears the symbolically important 5% barrier. That could release more market nervousness, particularly in stock markets. The dollar reaction yesterday suggests it can still enjoy some safe haven support but the jury’s out whether it'll remain the “go to” currency.

News and views

Australian GDP growth accelerated to 0.6% Q/Q in Q2 after more subdued growth in Q1 (0.3% Q/Q; heavily impacted by weather events). Household spending accelerated from 0.4% Q/Q to 0.9% Q/Q with sales related to the end of the financial year and new product releasees contributing to discretionary spending on good. Government spending increased as well, with their final consumptions growing from 0.3% Q/Q to 1% Q/Q mainly because of a rise in social benefits to households. Net trade also contributed to GDP growth (+0.1 ppt), led by exports of mining commodities which saw a rebound in production following severe weather disruptions in Q1. Imports of services was the largest detractor to net trade led by travel services. Public investment was the largest detractor from overall growth with public investments falling by 3.9% Q/Q driven by a decrease in state government expenditure on transport and health infrastructure, and a fall in defense investment. Today’s strong GDP number took Australian markets by surprise. They turn less certain on another RBA rate cut at the November policy meeting. The AUD swap rate curve bear flattens this morning with yields rising by 6.7 bps (30-yr) to 9.5 bps (3-yr). The Aussie dollar fails to profits but holds steady against a stronger greenback at AUD/USD 0.6510.

Download The Full Sunrise Market Commentary

Author

KBC Market Research Desk

KBC Bank

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold holds above $5,000 as bears seem hesitant amid Fed rate cut bets

Gold edges lower at the start of a new week, though it defends the $5,000 psychological mark through the Asian session. The underlying bullish sentiment is seen acting as a headwind for the bullion. However, bets for more rate cuts by the Fed, bolstered by Friday's softer US CPI, keep the US Dollar bulls on the defensive and continue to support the non-yielding yellow metal as the focus now shifts to FOMC Minutes on Wednesday.

Week ahead: Data blitz, Fed Minutes and RBNZ decision in the spotlight

The US jobs report for January, which was delayed slightly, didn’t do the dovish Fed bets any favours, as expectations of a soft print did not materialize, confounding the raft of weak job indicators seen in the prior week.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.