The market took a long look at the August nonfarm payrolls data and decided it wasn’t weak enough to price in a 50 basis point rate cut by the Federal Reserve this month.
Initially, the softer headline number and downward revision sent the odds of a 50bp rate up to 57% and the US dollar lower, but that move has now been reversed, in part because the Fed’s Williams didn’t show his cards. Of particular interest is also a speech from the Fed’s Waller at 11am ET.
The USD/JPY pair has been particularly volatile and is now 180 pips off the bottom.
USDJPY 10 min
The story is similar in the EUR/USD currency pair, which has fallen 70 pips from its high.
EURUSD 10 minutes
The bond market is also confirming the move, with yields now up 1-3 basis points on the day. The two-year yield is at 3.76% after falling to a low of 3.64%. The 10-year yield is 10 basis points above its low.