• US jobs report fuels expectations for a rate cut.
• All eyes are on this week’s inflation data.

The US dollar came under pressure after the release of the August jobs report, which missed expectations by a significant margin. Only 22,000 jobs were added during the month, a far cry from the 75,000 that were anticipated. What’s more, the labour market’s underlying weakness was underscored by revisions that reduced prior months’ job counts by 21,000. This consistent underperformance has led to a significant shift in market sentiment, with participants now forecasting that the Fed will enact three rate cuts before the year is out.

Japan:

The Japanese Yen (JPY) is weaker as political uncertainty rises. Prime Minister Ishiba has announced his intention to resign, with a new leadership contest scheduled for October 4th. This news has created some instability in the market.

Looking ahead, the main event for the USD will be Friday’s US jobs report, which is garnering more attention than usual after August saw a downward revision. Additional market focus will be on the ISM manufacturing data and the latest Federal Reserve Beige Book.

United Kingdom:

All attention is on the UK’s July GDP figures, due for release on Friday. Following a strong performance in June, the consensus is that economic growth will have stalled, so we will be watching closely to see if that holds true.

Eurozone:

European markets are facing political and economic headwinds. In France, Prime Minister Bayrou is likely to lose a confidence vote over his budget, adding to concerns about the country’s rising debt. The European Central Bank (ECB) is expected to hold interest rates at 2% on Thursday, as recent economic data has strengthened the case for a more cautious approach. A surprise move would be any commentary from the bank that suggests a more relaxed policy is on the horizon.

United States:

The key data releases this week are the Producer Price Index (PPI) and Consumer Price Index (CPI) inflation numbers. After last week’s disappointing jobs report, any indication that inflation is also falling could lead to a continued weakening of the US Dollar (USD), as it would reinforce the view that the Federal Reserve may be preparing to cut rates.

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