Ahead Today
G3: Germany Factory Orders, Eurozone Services and Composite PMI
Asia: Thailand CPI, Indonesia GDP
Market Highlights
The Dollar weakened sharply by close to 1%, while US 10-year yields fell to 4.57% on the back of a softer than expected non-farm payrolls print of 150k, which was also accompanied with some downward revisions to historical numbers. Some, but not all, of the weakness can be attributed to US auto strikes (around 30k), which should bounce back subsequently. More broadly, the details point to continued rebalancing in the US labour market, with moderating wage growth, slightly higher unemployment rates, and contraction in employment in the household survey.
Markets have now virtually priced out a Fed rate hike this year, and are now pricing in for close to 90bps of Fed rate cuts by the end of next-year, on the back of weaker payrolls and the recent dovish tilt from the FOMC. This would bring the Fed Funds rate to 4.375% in 2024 from 5.375% currently. Equity and risk assets rallied sharply, with the S&P500 rising 0.9%.
Regional FX
Most Asian currencies were stronger against the Dollar, following the broader dollar sell-off. KRW (+2.4%), THB (+1.4%), IDR (+1.3%) and MYR (+1.3%) outperformed, while we saw some underperformance in INR (+0.01%). China released balance of payments data, which showed inbound FDI slowed further to just US$4.9bn in the April-June period, the lowest since 1998. We saw some PMI numbers out of Asia, with China’s Caixin Services PMI in particular disappointing consensus at 50.4 (vs consensus 51.0). India Services PMIs remained robust, but showed some slowdown from the previous month. Meanwhile, Singapore’s retail sales came in weaker than expected at 0.6%yoy. We continue to expect USDSGD to move in line with the Dollar with MAS on hold in its exchange rate policy.
