- US August ISM manufacturing PMI 52.8 vs 52.0 expected
- US construction spending for July -0.4% vs. -0.4% estimate
- US August S&P Global final manufacturing PMI 51.5 vs 51.3 prelim
- Canada August S&P Global PMI 48.7 vs 52.5 prior
- US Q2 unit labor costs +10.2% vs +10.7% expected
- US initial jobless claims 232K vs 248K estimate
- Canadian July building permits -6.6% vs -0.5% expected
- Atlanta Fed GDPNow estimate for 3Q growth rises to 2.6% from 1.6% on August 26
- German economy minister: We should not rely on gas arriving via Nord Stream 1 this winter
Markets:
- Gold down $15 to $1695
- US 10-year yields up 12.5 bps to 3.25%
- WTI crude oil down $3.06 to $86.40
- S&P 500 up 10 points to 3964
- USD leads, EUR lags
The US dollar kicked on the afterburners in New York trading, largely aided by a surge in Treasury yields. US 2s rose to the highest since 2008, breaking through the 3.5% barrier as the market prices in a higher-for-longer Fed scenario. I wouldn't rule out flows as a factor in bonds as well, as we kicked off the new month.
Initially adding to the US dollar bid was a poor day for equities. The Nasdaq fell as much as 2% at one point but managed to turn it around in the final two hours of trading to finish flat. Even with that, there was barely any sign of life in anyting against the dollar.
The big move on the day was in USD/JPY, which took out the 140 barrier after a short battle. After hitting stops it quickly retraced by 40 pips but later rose as high as 140.22 and is closing near the best levels. It's the highest close since 1998.
The euro also threatened to break the recent low of 0.9901 but fell just a few pips short then bounced to 0.9950. A 75 bps hike is now fully priced in and that makes it tough to find a catalyst for further gains. TTF has prices and electricity prices have eased but still remain at levels that are badly damaging to the economy.
Cable faces a similar predicament and there are growing calls for +20% in the next six months. Those are the kinds of numbers that terrify investors and beg for an over-tightening of policy. The pair fell for the fiifth straight day, hitting a post-covid low of 1.1501 before finding small bids at the figure.
AUD and NZD both fell to six-week lows, losing about 0.8%. NZD is in danger of breaking the July lows while AUD has a bit more breathing room. CAD was curiously strong, likely because the market is takign a more-hawkish view of the BOC alongside the Fed. There certainly wasn't any help for oil as it also tests the July lows.
There's plenty hanging in the balance ahead of non-farm payrolls. Be sure to read our non-farm payrolls preview because there's a strong hint in the seasonals for this edition:
