• Major currencies subdued awaiting US jobs report
• ECB’s Villeroy: Our options are open at the next and upcoming rate meetings
• ECB’s Vujčić: We won’t know in Sept, October or even November where the terminal rate is
• BOE’s Pill: We have not seen a downturn in core inflation which would reassure us
• RBA to keep cash rate unchanged next week – poll
• China reportedly to take more action in order to try and revive property sector
• Eurozone August final manufacturing PMI 43.5 vs 43.7 prelim
• UK August final manufacturing PMI 43.0 vs 42.5 prelim
• UK August Nationwide house prices -0.8% vs -0.2% m/m prior
• Switzerland August CPI +1.6% vs +1.5% y/y expected
• Italy Q2 final GDP -0.4% vs -0.3% q/q prelim

Markets:

• JPY leads, AUD lags on the day
• European equities higher; S&P 500 futures up 0.4%
• US 10-year yields up 0.6 bps to 4.096%
• Gold up 0.2% to $1,943.79
• WTI crude up 1.1% to $84.53
• Bitcoin up 0.1% to $26,050

It was a quiet session for FX as traders are waiting on the US non-farm payrolls later today before firming up their convictions.

The dollar is steady across the board as narrow ranges prevailed during the session and in general, is trading little changed across the board now. The bond market was also in a similar mood, with traders keeping their attention on the jobs report to come.

Equities did nudge a little higher though, gradually advancing during the session. However, I’d argue the gains are tentative as investors are holding out some hopeful optimism – which may end up being dashed by the key risk event later today.

In terms of data, we got manufacturing PMIs which just solidified the notion that factory activity in the euro area continues to be stuck in a rut. And that downturn isn’t improving well enough to suggest a change in the worsening outlook ahead of Q4.

Welp. Now over to the much awaited non-farm payrolls data before the long weekend in the US.

This article was written by Justin Low at www.forexlive.com.

• 34 of 36 economists see the RBA leaving the cash rate unchanged next week
• 21 of 35 economists see the RBA hiking to 4.35% or higher by year-end
• The remaining 14 economists forecast no more rate hikes for the year

Among Australia’s „big four“, ANZ, CBA, and Westpac are not seeing any more rate hikes by the RBA for this year while NAB is the only one forecasting one more rate hike to 4.35% in November.

This article was written by Justin Low at www.forexlive.com.

US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Inflation expectations and CPI readings continue to
  show disinflation with the last two Core CPI M/M figures
  coming in at 0.16%.
• The US PMIs missed
  expectations across the board last week.
• Fed Chair Powell’s speech at the Jackson Hole Symposium was
  mostly in line with what he said previously but he stressed on the need to be
  careful going forward and that continued strength in the labour market may
  require further rate hikes.
• ·The first half of the week saw US Job Openings and Consumer Confidence reports
  missing expectations by a big margin, followed by a miss in the US ADP data and
  a beat in the US Jobless Claims.
• The market doesn’t expect another hike from the Fed
  anymore, but a lot will depend on the data going forward.

New Zealand:

• The RBNZ kept its official cash rate unchanged while
  stating that it will remain at the restrictive level for the foreseeable future
  to ensure that inflation comes down back to target.
• The recent New Zealand inflation and employment data surprised to the upside but
  the PMIs are in contraction with the Services PMI last week plunging into
  contraction.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely for
  second round effects.
• The New Zealand Retail Sales beat expectations although remain
  deeply negative.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD is
testing the key resistance at
0.5987 where we can also find the red 21 moving average for confluence. This is
where the sellers are likely to pile in with a defined risk above the
resistance to target another lower low. The buyers, on the other hand, will
want to see the price breaking higher to invalidate the bearish setup and
target the first swing high around 0.61handle.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we’ve been diverging with the
MACD for a
long time and this is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, the break of the trendline raises
the chances of a reversal with the 0.6117 level being the first target, but the
buyers will need the price to break above the 0.5987 resistance to confirm the
reversal.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a small range between the 0.5987 resistance and the 0.5930 support. A
breakout on either side should lead to a sustained and strong move and today’s
economic data might be the catalyst.

Upcoming Events

Today the market will
be focused on the main release of the week: the US NFP report. We will also
have the US ISM Manufacturing PMI an hour and a half later, but the labour
market data is the priority right now. A bad reading is likely to weaken the US
Dollar in the short term, but if the data is really bad, the market may start
to fear the recession and the greenback should come back soon after. A good
reading is likely to be linked with the soft-landing scenario and might be
bearish for the USD as well. Overall, it’s a mixed picture at the moment as the
Fed is expected to pause at the September meeting and we might get much worse
economic data before the next meeting in November.

This article was written by FL Contributors at www.forexlive.com.

• Need to be particularly wary about letting an inflation persistence dynamic set in

The BOE still needs to hike rates again, so the headline remark definitely sides with that. The OIS market is pricing in ~76% odds of a 25 bps rate hike for later this month currently.

This article was written by Justin Low at www.forexlive.com.

• Economic activity is slowing faster than we forecast
• Softening of economy may help bring down inflation faster
• But labour market resilience still an upside risk to inflation

At this point, it sure looks like they are leaning towards a pause but want to keep the door open to perhaps tighten policy again later on if need be. But the thing is, the economic deterioration in the euro area is going to make the case for rate hikes down the road extremely difficult. A rock and a hard place.

This article was written by Justin Low at www.forexlive.com.