Dollar under pressure
The dollar remains under pressure following Friday’s weak jobs data in the US, which has buoyed market expectations for Fed rate cuts. The euro is trading at a post-jobs data high of around $1.1770 – notwithstanding the collapse of the government in France after it lost the confidence motion in parliament yesterday evening – and is not far off its 2025 to date high of circa $1.1830, while sterling has advanced to about $1.3575 against the US currency. EURGBP is again little changed, trading at £0.8670 this morning.
US government bond yields continued to head south yesterday, falling by 3-7bps with the biggest decline seen at the long-end of the curve. UK bonds have benefited from the rally in US bonds, with 10- and 30-year yields down another 5bps or so yesterday having fallen by 7bps on Friday. German yields also ended the day lower, by around 2-4bps across the curve. French bonds are showing little reaction this morning to the collapse of the government, with President Macron’s office saying he would appoint a new prime minister in the coming days.
Equity markets had a positive day. European stocks outperformed, gaining almost 1% to more than reverse last week’s fall. The main US indices chalked up more modest gains of 0.3% to 0.5%, with the S&P 500 closing just shy of a fresh all-time high.
The New York Fed’s latest Consumer Expectations survey shows consumers’ 3- and 5-year ahead inflation expectations remained steady in August at 3% and 2.9% respectively. In terms of perceptions relating to the jobs market, the survey reported that “the perceived probability of finding a job if one’s current job was lost fell markedly by 5.8 ppt to 44.9 percent, the lowest reading since the start of the series in June 2013.”
Looking to the day ahead, it’s quiet in terms of economic data. The small business optimism index is due in the US, while the Bureau of Labour Statistics (BLS) publishes its “2025 Preliminary Benchmark Revision to Establishment Survey Data”. The latter is expected to show a downward revision to current estimates of the level of US payrolls employment.