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Due to worries about a significant economic downturn in the US, the USD, bond yields, and equities all declined. The S&P 500 dropped by 1.8%, the Dow by 1.5%, and the Nasdaq by 2.4%. The yield on the US 10-year bond dropped by 19 bps to 3.79%.
The risk-off sentiment continues as US payrolls raise concerns about the economy’s ability to achieve a soft landing. Non-farm payrolls grew by just 114k in July, well below the expected 175k, which is a significant shortfall. The unemployment rate increased to 4.3% from 4.1% in July, fuelling fears of a recession. This rise in unemployment is now 0.5% higher than the 3-month average low from the past year.
The data led Wall Street banks to urge the Fed for more aggressive rate cuts. Citi and JP Morgan predict a 50 bps cut at the September FOMC meeting, and market pricing now suggests a nearly equal chance of either a 25 or 50 bps cut. The USD dropped sharply as concerns about a hard landing for the economy grew. The dollar index (DXY) fell more than 1% to its lowest level since March, traded below 103.20.
We have the Caixin services PMI from China and the services ISM from the US. Last month, the services ISM unexpectedly fell into contraction, but the consensus anticipates a rebound in July.
This week, we’ll see the RBA’s decision, with expectations of keeping rates unchanged at 4.35%. The first-rate cut is projected for February, though it could happen sooner if conditions change. Locally, we’ll get the NZ unemployment rate on Wednesday and inflation expectations on Thursday. Both reports will influence the market and shape expectations for the RBNZ’s decision next week.
Economic Data
• AU – Jul. Judo Bank PMIs
• JP – Jul. Jibun Bank PMIs
• AU – Jul. Melbourne Institute Inflation
• NZ – Jul. ANZ Commodity Price Index
• CN – Jul. Caixin PMIs
• EU – Jul. HCOB PMIs
• UK – Jul. New Car Registrations
• EU – Aug. Sentix Investor Confidence
• UK – Jul. S&P Global PMIs
• EU – Jun. PPI
• US – Jul. S&P Global PMIs
• US – Jul. ISM Services Index
Mid market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6506 |
| AUD/NZD | 1.0938 |
| AUD/JPY | 95.30 |
| AUD/CNY | 4.6601 |
| AUD/EUR | 0.5964 |
| AUD/GBP | 0.5087 |
AUD/USD 24 Hour
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