USD steadies as stagflation fears mount – BBH

FXStreet Insights Team FXStreet

US Dollar (USD) recovered some of yesterday’s loss, S&P 500 futures are down after the underlying index hit a record high yesterday, and Treasury yields are up slightly. Markets are digesting ECB guidance and US CPI data, BBH FX analysts report.

Jobless claims hit highest since 2021

"The US economy is on the brink of stagflation. Progress towards the Fed’s 2% inflation goal is stalling. In line with consensus, headline CPI rose to 2.9% y/y in August vs. 2.7% in July and core CPI was unchanged at 3.1% y/y. Super core services (less housing), a good indicator of underlying inflation trends, printed at 3.2% y/y for a second consecutive month in August."

"In parallel, the US labor market is worsening. New applications for weekly jobless claims unexpectedly jumped to 263k for the week ended September 6 (consensus: 235k) vs. 236k the previous week, the highest since October 2021. We expect the Fed to prioritize maximum employment over price stability within its dual mandate given that monetary policy is moderately restrictive. Bottom line: a more dovish Fed policy stance can drag USD lower and underpin the rally in risk assets."

"The September University of Michigan preliminary consumer sentiment report is due today (3:00pm London, 10:00am New York). Headline is expected at 58.0 vs. 58.2 in August, well below the long run average at 84.4. More importantly, inflation expectations are likely to continue signaling that risks to the price outlook remain skewed to the upside. One-year inflation expectations are expected to print at 4.8% for a second consecutive month while inflation expectations 5 to 10 years out is seen at 3.4% vs. 3.5% in August."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

Crypto’s $638 million buyback boom may not be as bullish as it looks

Decentralized Finance (DeFi) protocols reportedly spent $638 million to buy back their native tokens in August, up 17% from a year earlier. On the surface, the buyback trend suggests the cryptocurrency industry is maturing fast, adopting one of Wall Street’s oldest tools to bolster valuations and distribute revenue. The headline becomes less impressive once the number is opened up.

Why hawkish Bank of Japan expectations aren't enough to sustain the Japanese Yen rally

The Japanese Yen (JPY) experienced a sudden burst higher after falling back below the 160.00 psychological mark against the US Dollar (USD) earlier this week amid a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.