Weaker US data and lingering tensions in the Middle East fueled haven-related buying in FX markets yesterday, sending the USD (+0.3% from 2-week lows) and CHF higher. Equity shares tumbled, and US Treasury yields fell by 5 basis points as concerns of a US economic slowdown mounted. Data from yesterday showed US manufacturing activity shrank by the most in eight months.

This morning's much-anticipated NFP data was markedly soft, with headline job additions of just 114k (175k forecast). The unemployment rate unexpectedly ticked up 0.2% to 4.3% (4.1% forecast) amidst a rising participation rate. Average hourly earnings rose 0.2%, slightly missing expectations—a welcome development. The USD fell as much as 0.7% after the release, with US 10-year Treasury yields touching levels last seen in December at 3.79%. The selloff in equities continues. Nearly 90 basis points worth of Fed cuts were priced in ahead of the NFP data, increasing to 114 basis points after.

EUR/USD closed 0.3% lower yesterday and is up as much as 1.0% today after the NFP data, trading roughly 0.35% higher than this time last week. Yesterday's unemployment rate in the eurozone region unexpectedly rose 0.1% to 6.5%. French industrial production missed estimates today. ECB Governing Council member Stournaras, speaking yesterday, foresees two more rate cuts this year to aid the region's struggling economy. The eurozone has quite a light data slate ahead next week.

GBP/USD lost over 0.9% yesterday after the BOE delivered its first rate cut since 2020, in what was essentially a 50-50 proposition based on market pricing heading into the decision. The voting committee voted 5-4 in favor of the rate cut, with the four minority voters expressing their preference to wait for more evidence of subsiding inflationary pressures. The BOE expects inflation to rise to 2.7% this year, slowing in the second half of 2025 and then dropping below the 2% target in 2026. "I’m not giving you any view on the path of rates to come," said Governor Bailey. The September BOE rate decision carries just under 50% implied odds of a second consecutive cut. The GBP is about 0.65% higher this morning, trading roughly 0.35% lower than this time last week.

USD/CAD closed 0.5% higher yesterday, hovering near levels last seen in October, as global growth concerns weighed on risk-correlated currencies like the CAD. Canada's manufacturing PMI data yesterday missed expectations, falling to its lowest reading since December. USD/CAD is down 0.25% today, trading about 0.2% higher than this time last week. Canadian employment data comes next Friday. A rate cut at the September BOC decision is over 100% priced in, as implied by swap odds.