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The DXY Index’s five-day recovery stalled, depreciating by 0.6% to 101.26. The greenback’s overall weakness, driven by Fed cut expectations, was most evident in the CAD, which appreciated by 0.3% to 1.3506 per USD. This appreciation occurred despite the Bank of Canada signalling further rate cuts after delivering its third 25 bps reduction to 4.25%. Meanwhile, the CHF is on the verge of reclaiming all of this year’s losses, prompting the Swiss National Bank to reinforce its dovish stance ahead of a third rate cut expected on September 26. The JPY strengthened further, appreciating by 1.2%, adding to Tuesday’s 1% rebound on the Bank of Japan’s commitment to keep hiking rates. USD/JPY ended at 143.74 overnight, its lowest close since January 3. A break below 143.50 could push the currency pair to retest the intra-day low of 141.70 on August 5. As the USD continues to lose ground against the JPY, this trend may extend to other currencies in the DXY basket. The GBP and EUR have already reversed this year’s losses into gains around mid-August. 
The US Treasury yield curve sloped positively for the first time since July 2022. The spread between the 10Y and 2Y yields closed at 2.4 bps, following a 10.9 bps decline in the 2Y yield to 3.754% and a 7.6 bps drop in the 10Y yield to 3.755%. The July US JOLTS jobs openings report showed the weakest reading since January 2021, with openings falling to 7673k, well below the 8100k consensus. June’s figure was also revised to 7910k from its previously estimated 8184k. The data is significant because the Fed has been closely monitoring the Beveridge Curve, which links rising unemployment rates to declining job openings. Today’s ADP Employment report and initial jobless claims will be closely watched for tomorrow’s nonfarm payrolls and unemployment rate data.
The Fed’s Beige Book supported Fed Chair Jerome Powell’s “the time has come” call to reduce interest rates. The number of districts reporting flat or declining economic activity increased to 9 in the current period from 5 in the previous period. Only 3 districts reported a slight increase in activity. Given the uncertainties over demand and the economic outlook, employers became more selective with their hires and were less likely to expand their workforces amid expectations for price and cost pressures to stabilize or ease further in the coming months. Although the employment levels were flat to up slightly in recent weeks, job seekers faced increasing difficulties and longer times to secure a job. Hence, markets will likely scrutinize today’s ISM Services PMI report through the same lens.
Quote of the day
”Companies don’t give job security. Only satisfied customers do.”
Jack Welch
September 5 in history
Canada put its first gold bullion coin on sale in 1979.
Topic
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