Forex First

The ECB cut rates by 25 bps yesterday. However, they did not commit to any further rate cuts and stated that any rate decisions would be data-dependent 📊. They sounded against any form of forward guidance 🚫. Lagarde reminded the audience that the ECB doesn't look at "one single number," and while the rate path is obviously on a "declining" trend 📉, nothing is predetermined, "neither in terms of sequence nor volume." She concluded by saying that no commitments were made for the October meeting. The Euro rose on the news and now trades at 1.1080 💶. BOJ board member Naoki Tamura sounded hawkish as he stated that the BOJ must raise rates to at least 1% as soon as the second half of 2025 🏦, but added that it would likely raise rates slowly and in several stages. USD/JPY slipped to 140.78 following the announcement, creating appreciation pressure on the Yuan, which now trades at 7.1088. USD/INR has opened slightly higher at 83.92. A dip in the dollar index could ideally lead to an appreciation toward 83.85. Hence, the likely range for the rest of the day is 83.85 to 83.95

The dollar trades at a 4-week high against the Euro 💵 after US CPI data failed to raise expectations of a jumbo rate cut by the Fed. The markets now factor in only a 15% chance of a 50 bps rate cut in September 📉. Japan's inflation number for August came in at 2.5%, far lower than the expected 2.9% 📊. A lower number may be a deterrent to BOJ to raise rates. The Yen depreciated to 142.96 🪙, alleviating fears of a rapid appreciation. The ECB monetary policy is due this evening, wherein it is expected to cut 25 bps points 📉. Investors will watch Lagarde's statement for determining the future course of action on rate cuts in Europe 🇪🇺. USD/INR has opened around 83.97. The likely range for the day is 83.90 to 84.01.

Asian stocks fluctuated as investors prepared for U.S. inflation data and a key presidential debate between Kamala Harris and Donald Trump. The debate could impact market sentiment, especially regarding fiscal policies. Trump is considered inflationary, while Harris is seen as aligned with the Fed. If Trump stands out as a clear winner of the debate, the dollar and U.S. Treasuries may gain. Conversely, if Harris wins, the dollar and yields may dip. Oil prices lingered near three-year lows due to demand concerns as OPEC has cut its forecasts for demand in 2024 and 2025. Investor focus is also on the U.S. CPI data due today. Only a significantly lower-than-expected number could prompt the Fed to consider a 50 bps rate cut this month. Meanwhile, the yen strengthened to a three-week high, sparking fears of another round of carry trade unwinds. The yuan is also under pressure, dipping to 7.1160 after reaching 7.1360 yesterday. The rupee is trading at 83.96, with the likely range for the pair between 83.90 and 84.02 during the day.

The Dollar Index has inched up as the market consolidates its expectation of rate cuts in September 2024. As of now they are factoring in just a 30 % chance of a 50 BPS rate cut. US CPI data due tomorrow may bring in more certainty into whats going to happen. The markets are however still factoring in a 41 % chance of an overall 100 BPS rate cut by Dec 24. CNH INR has neared 11.78 and would be a welcome relief for Chinese Importers. Rupee has opened aprund 83.95. Likely range for the day is 83.90 to 84.

The Non-Farm Payroll (NFP) data came in at 142k 📉, lower than the expected 166k 📊. However, markets were looking for an even lower figure to push the chances of a 50 basis point (BPS) rate cut to 100%. A number below 114k (July 2024) would have been ideal, but since that didn’t happen, the expectation for a 50 BPS cut dropped to 27%. Initially, both the dollar index and US treasuries fell upon the release 📉📈, but they recovered by Friday’s close. Now, the market's focus is on the Federal Reserve's decision—whether they opt for a 25 or 50 BPS rate cut. Attention shifts to the CPI data on September 11 📅.Similar to the NFP, a lower-than-expected CPI could increase the chances of a 50 BPS cut, with market volatility expected over the next two months. Afterward, the focus will shift toward the upcoming US elections in November 2024 🗳️.

The Chinese CPI rose by 0.6 % in August up from 0.5 % in July. This has led to a bit of depreciation in Yuan this morning. Similarly Yen also lost a bit as Japan's trade deficit widened more than expected in July. Nikkei fell nealy 1.8 % on the news. Dollar is on a pause mode now and may move up before the release of US CPI data due on 11th September 2024. The expectations of a jumbo rate cut by FED is gradually dissipating. 25 BPS cut looks like a more likely scenario. If that happens the dollar may gain around 2 % before the FED meeting due next week. Brent Crude has recovered slightly this morning after falling to an 11 month low last week. Rupee is likely to open nearly all time high of 83.97. The likely range for the day is 83.90 to 84.02.

The tables have turned. The ADP Employment numbers missed the estimates and now point to a deteriorating labor market and a possible recession. This sharply contrasts with the market's view of a soft landing in the USA, with a robust labor market in July 2024. An immediate reaction to this has been that the dollar slid again to near 101. The Euro and GBP have regained strength and appear dominant. The expectations of a 50 bps rate cut in September have moved up to 45% after the jobs report. This has impacted USD/JPY, with it now trading at 143. If the markets price in a 50 bps rate cut and the FED follows, USD/JPY could appreciate to 135 due to carry unwinds. This would trigger a similar appreciation in the Yuan, which may strengthen below 7. However, all this depends on a 50 bps rate cut. The NFP data due today will be the decider. The report is expected to show headline numbers for August around 160K, with the unemployment rate at 4.2% and average hourly earnings at 3.7% YoY. For July 2024, the NFP stood at 114K. Markets are anticipating a figure near 114K. If the number comes in as expected at 160K, it could reduce the likelihood of a 50 bps rate cut. In that scenario, the dollar may gain against all currencies, reversing the market's onslaught against it. Brent crude has fallen to the June 2023 lows of around 72.67 on the possibility of a delay in production increases by OPEC. USD/INR remains under no significant pressure but is subject to the whims of Mr. Shaktikanta Das, who, without valid reason, stated yesterday that a stable currency reflects a central bank's strength. He seems to be on a personal mission at the cost of increasing costs for Indian importers. The rupee has opened around 83.97. The likely range for the day is 83.90 to 84.

The US Job opening hits a 3 and a half year low brightening up the chances of a 50 bps FED rate cut in September 2024. Post the data Markets now anticipate a 41% chance of a 50 BPS Jumbo rate cut. Post the above data dollar lost again as Euro rose to 1.1086. We have ADP Employment data today which would be a precursor to NFP data due this Friday. Brace for further volatility on these data points. NFP is supposed to seal the deal on rate cuts. Yen has appreciated 143 making Yuan dip further below 7.10. USD INR trades 83.96 now. It is likely to attempt a move towards 84 as seen post OTC markets hours yesterday. Likely range for the pair is 83.90 to 84.01.

The Nikkei lost around 4% following a tech sell-off in America as Nvidia's share prices nosedived nearly 10%. The risk-off sentiment was aggravated by lower-than-expected ISM Manufacturing data from the USA, which suggested that factory activity will remain subdued. This raised concerns about a hard landing and a growth scare in the USA, thus increasing the appeal of safe havens like the Yen and Gold. The Yen appreciated slightly below 145 this morning, leading to a fall in the Nikkei by around 4%. Any further appreciation could bring back the haunting memories of the carry trade "rout" we saw recently. Focus will shift to the ADP Employment Data and Jobless Claims, due today and tomorrow respectively. The NFP data due this Friday will be a key factor in determining the size a potential rate cut in September 2024. Brent Crude has fallen to $73.35 on news that Libya may resume exports. A drop like this is a welcome relief for India; however, oil companies may be prompted to build further inventories. USD/INR opened around 83.95. The likely range for the day is 83.89 to 83.99.

The Euro Zone Manufacturing activity stagnated in August while German PMI fell to a 5 month low pushing Euro lower towards 1.1050. After being beaten the dollar recovered from last week and now trades as 101.73 as US Manufacturing and NFP data becomes due this week. A bit of a relief on Yuan as it depreciates to 7.1247 this morning on dollar recovery. A rise above 7.15 should prompt Indian inporters to hedge their exposures for the near term. USD INR trades at 83.94. The likely range for the day is 83.89 to 83.99.