reports
- Francesco Pesole
- James Knightley
Bank of Canada set to resume rate cuts
The Bank of Canada is set to resume cutting interest rates in the wake of a large GDP contraction in the second quarter and rising unemployment. Tariffs will continue to weigh on the economy, and with inflation broadly in line with target, we look for a 25bp cut on Wednesday, with a further 25bp cut in the fourth quarter. CAD should remain weak in the crosses
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Policy convergence raises EUR/USD potential
The combined effect of a hawkish ECB and US data (consensus core CPI and spike in jobless claims) has sent the EUR:USD short-term rate differential to the tightest in a year. Spot has only partly followed higher, and we see more upside risks for EUR/USD in the near term. We have published previews for the Fed and Norges Bank meetings next week
- Francesco Pesole
A narrow call for a Norges Bank cut next week
Sticky inflation and good forward-looking surveys are making the 18 September Norges Bank decision a hard one. We narrowly favour a 25bp cut to 4.0% (17bp priced in), as upbeat growth expectations are probably incorporating lower rates this quarter, EUR/NOK levels are favourable for a cut, and Norway's real rate looks too restrictive
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: US CPI to cement dovish conviction
After a subdued PPI print yesterday, the chances of today's US core CPI exceeding the consensus 0.3% MoM are lower. We expect firmer conviction on three Fed cuts by year-end after today's release and a weaker USD. In the eurozone, the ECB meeting should have little impact on FX, with only some minor EUR downside risks. Geopolitics remains sidelined
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Liquidity-fuelled rally trumps geopolitics
Risk assets continue to rally even as new geopolitical risks emerge. Ultimately, this is a bearish story for the dollar, but for today, focus will be on the August US PPI data and speeches in Europe. These include a State of the Union address by EC President Ursula Von der Leyen and a speech by the SNB governor. Expect more consolidation in FX markets
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Swiss National Bank seems more comfortable with CHF strength
In quiet markets, the dollar is a little softer than we had expected. The highlight today will be the preliminary annual revision to US jobs data, where the annual number up to March could be revised 700k lower. Elsewhere, we noted an interview by Swiss National Bank Governor Martin Schlegel expressing tolerance of Swiss franc strength
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Politics and taxes take edge off dollar bear trend
Political developments in France and Japan are limiting the euro's and yen's chance to rally against the softer dollar. The calendar is surprisingly busy this week with key events such as US payrolls, benchmark revisions, US August CPI and an ECB rate meeting. The 15 September US corporate tax payment date could keep the dollar temporarily bid, too
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Deteriorating jobs market to smooth dollar decline
Unofficial jobs reports (ADP, JOLTS, Challenger) have all pointed to a deterioration in line with rising Fed concerns. The focus for today's jobs report will be split between the headline August payrolls print, revisions and unemployment. We see mostly downside risks for the dollar (which already looks expensive) as bets on three Fed cuts can increase
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Mood on jobs worsens ahead of US payrolls
Yesterday's JOLTS data indicated further cooling in the jobs market, and, based on Christopher Waller's hints, we should see a soft ADP report today. We aren't convinced markets are ready to jump aggressively into another round of dovish repricing just yet, but the dollar should already be weaker based on current short-term swap rate differentials
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Global bond slump not a sustainable FX driver
Dollar shorts have been trimmed as global long-dated bonds have faced pressure this week. But we don't see this overshadowing the data and Fed drivers for the dollar, and the move may be unwound in the coming days. Similarly, we don't think the pound has much more to fall from domestic bond pressure. Today, US JOLTS job data can have a substantial market impact
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Dollar could find some seasonal support
The dollar has found a little support at the start of the week. Chinese authorities have now turned to fixing USD/CNY a little higher, which removes one of the dollar's negative impulses from last week. The highlight of an otherwise quiet session will be today's eurozone flash CPI release for August and the US ISM business confidence data
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Big week for US labour data and the dollar
After today's Labor Day holiday, this week's US calendar is packed with labour market data, culminating in Friday's August jobs report. Elsewhere, investors don't quite know what to make of an appeals court ruling Trump's universal tariffs illegal. Could it be a story of lost revenues weighing on the Treasury market? We expect the dollar to stay soft
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Turning a blind eye to Fed independence risk
Lisa Cook is challenging her dismissal in court, and markets are seemingly staying away from pricing in any substantial dovish shifts at the FOMC beyond what can be derived from data and Powell's remarks. But the dollar's downside risks have increased, even if that won't show in the near term. Today's focus will be on inflation data in the US and eurozone
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Making the renminbi great again
Wednesday saw no further progress in the administration's removal of the Fed's Lisa Cook. The FX environment remains choppy, but we note the continued low fixings in USD/CNY – seemingly a move by Beijing to preserve the purchasing power of households and boost consumption. Elsewhere, healthy car sales data in Germany can provide some support to the euro
- Benjamin Schroeder
- Francesco Pesole
- Michiel Tukker
French political storm: What it means for bonds and the euro
French bond yields have risen significantly against German bunds and are likely to stay elevated or potentially move higher. The European Central Bank still appears to be a reliable backstop against excessive bond turmoil. Even if OAT-Bund spreads keep widening in the medium term on the back of fiscal woes, the rate of change matters much more for the euro
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Limited FX fallout from France and Fed turmoil
It's becoming increasingly clear that Trump's dismissal of Lisa Cook is not going to have a big short-term FX impact. The implications may only play out in the longer run, as the current focus remains more on data. French politics also appears to be treated with plenty of caution by the currency market. We think EUR/USD can stabilise today
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: French and US political drama may lift volatility
Having enjoyed a brief session on Friday of unalloyed joy as Fed Chair Jerome Powell hinted at a September rate cut, financial markets may now face some uncertainty on political developments in France and the US. We're still happy with a bearish story for the dollar, but it might have to be the more defensive Japanese yen or Swiss franc which takes the lead now
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Dollar drifts higher ahead of Jackson Hole speech
The dollar is drifting higher ahead of a key speech from Fed Chair Powell today. Driving that has been some slightly better business confidence data, questioning whether the Fed needs to cut in September. We doubt the dollar has to rally too much further. Behind the scenes, it seems that foreign central banks are quietly leaving the US Treasury market
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: EM and China remain in demand
The release of the July FOMC minutes failed to move the needle on the dollar story. What is interesting is the continued strong performance of Chinese assets, with the benchmark CSI 300 equity index up 5.9% this month in dollar terms and the PBoC's USD/CNY fixing at its lowest since last November. Investor appetite for EM is typically a dollar negative
- Chris Turner
- Francesco Pesole
EUR/USD: Our latest views
Earlier in August, we published our monthly FX update. That was centred around the view that the last line of defence for the dollar – a resilient jobs market – had started to capitulate with large payrolls revisions. In this note, we discuss our latest thinking and why we are looking for 1.20+ levels through 2026
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