FOREX: USD Gears for Most Consequential NFP of Trump's Term
The USD Index is holding at yesterday's lows in expectedly light trade so far, as markets gear for today's payrolls print. USD markets have eased of the week's earlier highs on continued softness in labour market data (JOLTS, IJC and the employment components of ISM services & manufacturing all came in weaker-than-expected), which is helping weigh on the whisper number for today's print, down to 75k (inline with consensus) after holding between 80-85k at the beginning of the week.
- Options markets help us quantify the market risk into today's print, and the vol premium added is sizeable: an average 3.9 point vol premium across G10 FX is close to double that seen for the July, June and May NFP - making the August print potentially the most consequential since January.
- Markets maintain the net short USD position that carried over the summer - but investors are seemingly unwilling to engage in more convictive downside despite the growing risks to Fed independence and firmer pricing for Fed easing into year-end. This may be down to growing fiscal and political risks in the UK and Europe - in which case, a fade of these risks could provide fresh impetus to push the USD lower from here should today's NFP print endorse current Fed pricing.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GILTS: Bear Steepening Ahead Of Global Supply
Gilts follow peers lower at the open, with a soft start to this week’s U.S. Tsy issuance and a move away from Tuesday lows in crude oil futures eyed.
- Note the European and U.S. issuance (detailed earlier) is due today and may be providing some weight this morning.
- Futures through yesterday’s low but within this week’s range.
- Lows of 92.36 seen so far.
- Bears will look to force a break of Monday’s low (92.24) to expose the 20-day EMA (91.86), as they look to quell some of the recent bullish momentum. Initial resistance at yesterday’s high (92.84).
- Yields 1.5-3.0bp higher, curve bear steepens.
- 2s10s back above 70bp after the first close below since early July, while 5s30s remains pinned around 140bp.
- GBP STIRs a little more hawkish than pre-gilt open levels, SONIA futures flat to -3.5. BoE-dated OIS still showing ~48bp of easing through year-end, with over 90% odds of a cut priced for tomorrow.
- NIESR comments underscored UK fiscal worry and an in line with market pricing view of future BoE policy moves (detailed in our early morning STIR bullet).
- Little of note on the UK calendar today.
MNI: EUROZONE JUL FINAL CONSTRUCTION PMI 44.7 (45.2 JUNE)
- MNI: EUROZONE JUL FINAL CONSTRUCTION PMI 44.7 (45.2 JUNE)
SWEDEN: Full Forecast Updates From NIER: GDP Revised Lower
NIER Forecast Changes below. Diff columns represent changes relative to the June forecast round.
| 2024 | 2025 | Diff | 2026 | Diff | |
| GDP, market price | 1,0 | 0,7 | -0,3 | 2,6 | -0,1 |
| Employment | -0,5 | 0,4 | 0,0 | 0,8 | 0,0 |
| Unemployment | 8,4 | 8,7 | -0,1 | 8,4 | 0,0 |
| Hourly wage | 4,1 | 3,6 | -0,1 | 3,5 | 0,0 |
| CPI | 2,8 | 0,6 | 0,1 | 0,9 | 0,0 |
| CPIF | 1,9 | 2,5 | 0,1 | 1,6 | 0,0 |
| Policy rate | 2,75 | 1,75 | 0,00 | 1,75 | 0,00 |
| Public financial savings | -1,5 | -1,2 | -0,1 | -0,8 | -0,1 |
| Structural savings | 0,1 | 0,2 | 0,1 | -0,1 | 0,0 |
| Maastricht debt | 33,9 | 34,3 | 0,2 | 33,9 | 0,3 |
Source: NIER. Note: Percentage change and percentage points unless otherwise stated
