Following a disastrous Friday for dollar assets, both the US dollar and US equity indices are showing tentative signs of life. Euro/dollar is hovering around 1.1548, as dollar bulls are gradually chipping away at last Friday’s significant euro gains, which was the strongest one-day rally in euro/dollar since April 2025, when reciprocal tariffs were denting dollar demand.
US stocks fared better on Monday, fully erasing Friday’s aggressive selloff, as investors refocused on the main drivers of the recent rally, such as AI, with discussions about the September Fed meeting also being a critical factor at this stage. Similarly, cryptocurrencies are also bouncing higher this week, with bitcoin trading slightly below the $115k level.
Market talk continues to evolve around Friday’s nonfarm payroll shock, and particularly the backward revisions that shocked investors. While most Trump opponents view his move to replace the BLS head as hasty, it is undeniable that the quality of jobs data has been deteriorating in recent years, with little effort being put in by the BLS to remedy this situation.
While the loss of 258k jobs was the tip of the iceberg, the situation could become even more complicated in early September when the annual benchmark revisions for April 2024-March 2025 will be announced. Therefore, while Trump’s style remains borderline authoritarian, his efforts could result in meaningful improvements in data quality, even if his motives are not really focused on that goal.
The primary beneficiary of improved data will be the Fed, which has potentially been mistakenly maintaining the current balanced approach without accurate information. Interestingly, following FOMC members Bowman and Waller publishing separate statements and detailing the reasoning behind their rate cut votes, other dovish FOMC members are becoming more vocal. San Francisco President Daly has been the latest member to support a September rate cut; while she doesn’t vote until 2027, this is another indication that the tide is gradually turning in favour of a rate cut.
The market is currently pricing a 94% probability for a September rate cut, with some analysts even suggesting a 50bps rate move if the data between now and September 17, particularly the CPI reports and the September 5 jobs data, show continued and marked deterioration. What looked like a quiet summer period has now transformed into the most critical phase in the current easing cycle that commenced 11 months ago with a 50bps rate cut in September, with the Jackson Hole Symposium attracting additional importance and attention.
Following the final prints of the July PMI surveys, the key ISM non-manufacturing PMI survey is expected to show a marginal improvement. The focus will also be on the sub-indices, and particularly the possible combination of softer inflationary pressures combined with an increase in new orders, which could be welcomed by the US administration.
But the biggest event of the day, which could monopolize investors’ attention, is US President Trump’s scheduled appearance on CNBC at 12:00 GMT today. It is quite rare for the incumbent US President to go live on TV, particularly after the nonfarm payrolls data shenanigans. He will obviously be asked about the Fed and tariffs, which means that there is a considerable risk of a small risk-off reaction today if Trump ups his aggressive rhetoric even further.
Despite the improvement in risk appetite on Monday, gold is retaining its recent gains and, at the time of writing, is hovering around $3,360. It remains at the midpoint of its recent trading range, with a decent probability of another rally if Israel goes ahead with the discussed complete takeover of the Gaza strip. Meanwhile, oil’s sell-off appears to be pausing near the $66.80 area, as Trump is increasing pressure on India via the tariff channel regarding India’s purchases of Russian oil.
