The U.S. Dollar erased some of its gains from yesterday as the volatility and uncertainty of markets continue to weigh on outlooks for the remainder of the year.
Overview
The global bonds market has entered bear-market territory for the first time in 20 years as interest rates have gone all over the place with inflation expectations as well as central bank action in a heated battle.In terms of domestic data, Non-Farm Payrolls for August improved more than expected, while Unemployment increased just slightly from 3.5% to 3.7%. The stable situation the numbers present with a bit of a downward tilt is exactly what the Fed is looking for to validate its hawkish course of action. Expect more FX flows to be based on the fate of commodities, with oil declining after news of the Group of Seven looking to set a price cap for global purchases of Russian crude.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
The Euro picked up some steam to cut losses, but it remains at one of its weakest points since the early 2000s. Multiple factors are affecting Europe, but at least in terms of gas reserve targets, the future is looking less dim. We still hold some hope that a resilient Euro-zone can withstand recessionary pressures and benefit the shared currency.
JPY ⇓
The Japanese Yen hit its weakest value in almost 25 years, reaching the nadir as Asian markets continue to struggle with globalized lines still facing COVID-related shutdowns. Although some speculate the Bank of Japan may intervene, we believe the difference in central bank thinking will maintain the buck afloat. U.S. yields are way high, and the BOJ looks in no hurry to try playing catch-up. Both Japan and China are reportedly accepting more visitors and want to reignite tourism, but the latest lockdowns suggest there is still too much hesitation to open back up fully.
