The USD weakened 0.15% for its second straight daily drop yesterday after ADP employment data saw its lowest job adds number since the beginning of 2021, including the prior reading being revised lower. US Treasury Secretary Janet Yellen spoke hours after the release, touting “a good, healthy labor market where we continue to create jobs.” “The job market has become less tight within the last year or so, but the unemployment rate we have today by historical standards would be considered very low,” she added.

US nonfarm payrolls missed expectations this morning (+142k vs 165k median forecast), including net revision of -86k jobs over the past 2 months. The unemployment rate fell to 4.2% from 4.3% previously, and hourly earnings printed above-forecast. Implied odds of a 50 basis-point rate cut at the September 18^th Fed rate decision rose beyond 50% (40% yesterday) as investors interpret the dovish employment data. Fed President Williams spoke just after the release, endorsing the start of policy easing: “With the economy now in equipoise and inflation on a path to 2%, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate.” The Fed’s Waller and Goolsbee speak later today, the last Fed officials to speak before the blackout period begins. The initial USD reaction lower to the NFP data has fully retraced and is now up 0.2% on the day.

EUR/USD rose 0.25% yesterday and is 0.35% lower today, trading essentially flat to this time last week. Quarterly eurozone GDP growth data was revised down to 0.2% from 0.3% previously that showed a waning domestic demand component (-0.1% quarter-over-quarter). German industrial production data also disappointed. The ECB makes its next rate decision in just under a week (Thursday September 12^th) and is fully priced for a 25 basis-point policy rate reduction.

GBP/USD gained 0.25% yesterday and is 0.25% lower today, trading about 0.1% higher than this time last week. A report today showed UK house prices just shy of record highs after 2 straight months of gains following the August 1^st BOE rate cut. Key employment data comes Tuesday. Implied odds of a rate cut at the BOE’s September 18^th decision sit at just 20%.

USD/CAD closed flat yesterday and is marginally higher today, trading approximately 0.25% higher than this time last week. Employment data saw a slight miss on the headline job adds number, with the unemployment rate rising beyond expectation and hourly wages declining less than forecast. Part time jobs were responsible for the overall gain in employment as the report saw 43.6k of full time job losses, a dovish result. Investors have moved to price nearly one-and-a-half 25 basis-points worth of cuts for the next BOC decision on October 23^rd, 2024.