FOREX: EUR/USD Surges on Soft US Jobs, Hesitant Lagarde
- The USD Index traded weaker into the Thursday close. While August CPI data came in alongside expectations, it was the particularly poor weekly jobless claims numbers that drove the price lower. The USD Index sales came across several phases through Thursday trade, with price action getting a further boost on the core equity rally.
- The e-mini S&P rallied alongside spot gold prices - both gaining as markets cemented expectations for outsized easing at the September FOMC meeting. OIS markets retain full pricing for a 25bps rate cut next week, with partial pricing still pointing to a decent chance of a 50bps move.
- EURUSD gained ground throughout the ECB press conference, breaking the Thursday highs at 1.1738 amid a hawkish-leaning Lagarde as well as the soft jobs data. Lagarde's key press conference signals include her statement that the risks to Eurozone economic growth have become "more balanced" (she previously had noted downside risks), as well as the phrase that "the disinflationary process in Europe is over". These underpinned a hawkish adjustment in EUR STIR.
- Focus Friday shifts to the UK activity data, in which markets expect both industrial and manufacturing production to slow on a monthly and yearly basis - underscoring a slower level of monthly GDP growth into Q3.
- French and German inflation numbers are also due, but it's the prelim University of Michigan sentiment numbers that should prove more decisive. Markets expect the one- and 5-10 year inflation expectation metrics to slow by 0.1 ppts apiece ahead of next week's FOMC decision.
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- EUR/USD: Aug14 $1.1590-00(E1.8bln), $1.1625-35(E898mln), $1.1645-50(E1.2bln), $1.1695-00(E4.5bln); Aug15 $1.1590-00(E1.1bln); Aug18 $1.1560(E1.1bln)
- USD/JPY: Aug14 Y147.00-20($1.2bln), Y148.15-30($945mln), Y155.00(Y1.6bln
- GBP/USD: Aug14 $1.2975-00(Gbp1.2bln)
- EUR/GBP: Aug14 Gbp0.8690-05(E1.1bln)
- AUD/USD: Aug14 $0.6600(A$1.3bln)
- USD/CNY: Aug15 Cny7.5000($1.7bln)
US TSYS/OVERNIGHT REPO: SOFR Softens Slightly, Potential Pickup Ahead
Secured rates were a little softer Monday as was broadly expected, with SOFR edging 1bp lower to 4.34%. Other major secured rates and effective Fed funds were unchanged.
- As we noted yesterday, pressure could pick up later in the week on Treasury auction settlements. These include $55B in net cash raised by bills today, and a further $42B on Thursday, followed by $35B in coupon settlements Friday.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.34%, -0.01%, $2796B
* Broad General Collateral Rate (BGCR): 4.33%, no change, $1173B
* Tri-Party General Collateral Rate (TGCR): 4.33%, no change, $1137B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $115B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $263B
US: BLS Commissioner Nominee Antoni Suggests Suspending Monthly Payrolls Report
Fox Business has published an interview with E.J. Antoni in which the White House's nominee as the next Bureau of Labor Statistics commissioner suggests that the monthly Employment Situation (ie nonfarm payrolls) report should be "suspended":
- "Until it is corrected, the BLS should suspend issuing the monthly job reports but keep publishing the more accurate, though less timely, quarterly data... Major decision-makers from Wall Street to D.C. rely on these numbers, and a lack of confidence in the data has far-reaching consequences."
- He adds: "How on earth are businesses supposed to plan – or how is the Fed supposed to conduct monetary policy – when they don’t know how many jobs are being added or lost in our economy? It’s a serious problem that needs to be fixed immediately."
- This interview was conducted on Monday, before Antoni's nomination by the President. Though it's notable he "told FOX Business that he doesn’t believe the jobs data was intentionally manipulated, as some have suggested, but instead argues that persistent flaws in the Bureau of Labor Statistics' methodology have gone unaddressed."
