USD softer as markets ponder rates, growth – Scotiabank

The US Dollar (USD) is trading mixed to lower against the major currencies. Trading remains subdued across the majors, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

USD slips versus most G10 currencies as Friday sell-off resumes

"The NZD is a moderate outperformer on the day after last night’s Q2 Unemployment report showed a smaller than expected increase in the jobless rate. Asian FX is generally underperforming and the CNY is marginally lower after the PBoC set a weaker than expected fixing. Stocks remain firm despite President Trump threatening more aggressive tariff action on India due to its purchases of Russian oil. Crude prices are firmer as traders focus on potential US action to curb Russian supply."

"US ISM data yesterday extended the 'stagflationary' tone of recent US data reports and helped maintain the run of generally disappointing (relative to expectations) economic updates from the US. The service sector should be somewhat removed from the immediate impact of tariffs but the headline number suggests activity all but stagnated in July while prices rose at the fastest pace since late 2022. Activity in manufacturing and services is sluggish to flat and employment is contracting in both sectors, the ISM data indicates. USD sentiment remains soft. The DXY is holding close to the peaks seen around Friday’s weak US jobs report and risk reversal pricing continues to reflect a better bid for USD puts over calls."

"Following the USD’s July consolidation/rebound, we think it is prone to renewed losses as investors confront the rising risk of slowing US growth momentum, easier Fed policy and have to consider the potential for politics to cast a shadow over monetary policy and data reporting moving forward. The short-term charts reflect key intraday DXY support at 98.55 which is under pressure in early trade. After yesterday’s mediocre 3Y auction, the Treasury comes back with a 10Y sale today. There are no major data reports from the US today. The Fed’s Cook and Collins (both voters) are participating in a panel event at 14ET. Daly (non-voter) speaks at 16.10ET."