CAD
Tomorrow’s BoC decision remains the major domestic event of the week for loonie traders. We continue to expect a 25bp cut from the Governing Council, accompanied by a signal that further cuts are on the table at every meeting for the remainder of the year. If delivered, this would meet market expectations, and likely see USDCAD little changed. Risks ahead of the event, however, look asymmetric to us. Specifically, while we doubt that a pause is under consideration anytime soon, an acceleration in the pace of easing could well be a conversation point. A hint in this direction from Governor Macklem tomorrow would likely see the loonie giving up recent gains, extending a selloff that has seen USDCAD rise 0.2% so far this morning. Until then though, Manufacturing PMIs are the main event of note – a repeat of last month’s contractionary print could add further downside pressure on CAD this afternoon.
USD
ISM manufacturing data is the key point of note for the US today – an appetiser ahead of Friday’s main event, with the publication of the August jobs report. With all attention squarely on the state of the US labour market, traders will be keeping a close eye on the employment sub-index of the ISM survey which slipped notably last month, landing at 43.8. A repeat today is likely to see a hard stop for the dollar rally that has been a key theme so far this week. That said, last month’s print looks anomalous to us. Instead, we think the reading should revert higher, further allaying fears over the state of the labour market, an outcome that should see the greenback extend gains heading towards Friday.
AUD
The Aussie has been a standout mover this morning, shedding almost 0.7% against the dollar. The move lower for AUDUSD comes as balance of payments data for Q2 undershot expectations at -A$10.7b, while growth concerns around the Chinese economy also weighed at the margin. Whether or not this slide continues in the short term will rest on tomorrow’s Australian GDP data, and on Caixin PMIs, both of which look likely to prove underwhelming on balance after considering today’s trade data.
EUR
A light data calendar should see the euro take a back seat today, extending yesterday’s muted price action which saw a 0.2% grind higher for EURUSD. Instead, the focus is likely to once again be on ECB speakers, politics, and external risks, a dynamic that we think should continue to add modest upside pressure to EURUSD. On this point, a speech by the ECB’s Nagel at 17:45 BST is the standout, though we doubt there will be any significant hints on the likely path for eurozone rates. All told, this should leave EURUSD trading at the mercy of external conditions, with ISM manufacturing data from the US as the most notable risk event.
CHF
A double header of Swiss inflation and GDP data has given CHF traders plenty to chew over this morning. The former marginally undershot expectations to see price growth flatline in August, leaving inflation tracking at 1.1% on a YoY basis. The latter meanwhile saw a 0.7% QoQ expansion in activity in Q2, exceeding market consensus that had looking for a 0.5% in GDP. That said, given the distorting impact of sporting events on Swiss GDP, and with the Euros having taken place this summer, we think policymakers will be inclined to discount the latter reading. Instead, disinflation should remain front of mind for policymakers, especially considering the risk that the strong franc poses to the inflation outlook. All told, we still expect to see the SNB cut rates at their policy meeting on September 26th, likely accompanied by suggestions that a weaker franc would be preferred too – an outcome that should see CHF giving up some recent gains this month.
GBP
A quiet start to the week for sterling from a data perspective is set to continue today. BRC like-for-like sales, released just after midnight is the only release of note in the calendar. Granted, this showed a modest rise in YoY volumes, climbing 0.8%. But this was still insufficient to stymy a slide in GBPUSD, which is down 0.25% in early trading. The focus for sterling traders today, however, is likely to be on the BoE’s Breeden, who speaks later today at 13:45 BST. Not only is she new to the MPC, meaning her views on policy remain a relative mystery, but Breeden is also one of three swing voters who are likely to determine the pace of Bank Rate easing. With this in mind, traders will be paying close attention to any comments on the likely pace of cuts, with a rate hold expected this month. Any hawkishness would validate current market pricing which sees only 22% of the Bank easing policy this month. A dovish steer, however, should see this morning’s sterling selloff extend.
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