The DXY Index depreciated by 0.3% to 97.5 overnight, following through on last Friday’s 0.6% loss driven by weak US nonfarm payrolls. Selling pressure on the greenback resumed alongside the increased bets for the Fed to signal more rate cuts at next week’s FOMC meeting. The USD is also weighed down by uncertainty over the legal fate of Trump’s tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The Trump administration has petitioned the Supreme Court to expedite its review of a federal appeals court ruling that struck down most of its tariffs, proposing oral arguments in early November. The Supreme Court must decide whether to take the case by October 14, which is the appeals court’s deadline for Trump’s tariffs to stay.
EUR/USD brushed aside the French political crisis and appreciated for a second day by 0.4% to 1.1762, closing in on the year’s high of 1.1830 on July 1. French President Francois Bayrou was ousted by a 364-194 vote of no-confidence in the National Assembly on Monday. President Emmanuel Macron is tasked with appointing a replacement, though the deeply fractured National Assembly – which lacks a majority for any single party or coalition following the July 2024 snap election – points toward continued political instability and gridlock. For now, the EUR is supported ahead of Thursday’s European Central Bank meeting. The ECB is better situated to hold off on further easing after its extended cutting cycle, while the Fed is pressured to resume its rate-cutting to combat labour market weakness in the US.
GBP/USD appreciated 0.3% to 1.35454 but needs to take out the resistance at 1.36 to advance to the year’s high of 1.3790 seen on July 1. The situation remains one of USD weakness rather than GBP strength. Markets are positioning for next week’s FOMC and Bank of England meetings, where the Fed will likely signal more cuts this year and the BOE will likely hint at delaying cuts to 2026. The prospect of Fed cuts has dampened global yields, leading the 30Y Gilt yield to retreat to 5.46% from the year’s peak of 5.69%, which helped to ease recent fiscal concerns in the UK.
Quote of the Day
“A bore is a person who opens his mouth and puts his feats in it.”
Henry Ford
September 9 in history
The first case of a computer bug being found: A moth was lodged in a relay of a Harvard Mark II computer at Harvard University in 1947.
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