Headlines

* US dollar regains footing as markets pare bets on big Fed rate cut

* Stocks recover chunk of last week’s losses with nearly all sectors green

* Apple unveils iPhone 16 and new tech, and its AI

* Gold prices steady with spotlight on Wednesday’s US inflation data

FX: USD rebound continued from Friday’s lows at 100.58 after the NFP release. There was little news flow. Instead, markets digested Friday’s recent employment data. The odds of a 25bps rate cut next week by the Fed sit at 71%, with a jumbo sized 50bps move at 29%. The latter was close to 50% before the jobs report. Focus will shift to the US Presidential debate and then US CPI on Wednesday.

EUR closed near its lows and the recent cycle bottom at 1.1026. A 25bps cut at Thursday’s ECB policy decision is fully priced in. Cautious guidance on the outlook might be modestly euro supportive.

GBP was soft as cable hit two-week lows at 1.3067. Attention is on today’s wage growth figures and unemployment rate.

USD/JPY printed an inside day as prices moved modestly higher, above Friday’s low at 141.76. The early August spike low is 141.68. The move north came after four consecutive days of selling. Risk on sentiment saw the safe haven yen underperform.

AUD printed a very marginal down day as buyers tried to cling to the 50-day SMA at 0.6669 and a major Fib level at 0.6671. USD/CAD traded in narrow range with the loonie outperforming, as crude tried to steady amid the positive risk mood. Friday’s Canadian employment data was near expectations in headline terms. But the composition of job gains was weak, and the jobless rate ticked up.

US Stocks: Stocks were firmer to kick off a busy week.  The S&P 500 gained 1.16% to settle at 5,471. The tech-laden Nasdaq 100 added 1.30% to finish at 18,660. The Dow closed 1.20% higher at 40,829. All sectors gained, apart from communication services. Apple had its “Glowtime” event to announce the new iPhone 16, watches and AirPods. The iPhone comes with Apple Intelligence and will be available on September 20. US stocks suffered their worst week in more than a year, as weak economic data and cautious commentary from central bankers stoked investor fears over a potential economic slowdown. Remember that we are now in the Fed blackout period so won’t hear from any FOMC officials.

Asian stocks: Futures are in the green. Asian stocks suffered losses after markets reacted to the softer jobs data. The ASX 200 slid as gold stocks and financials underperformed. The Nikkei 225 gapped below the 36k level with Japan Q2 GDP revisions not helping. The Hang Seng moved down on weakness in energy-related stocks. Shanghai Composite was soft on weaker than expected inflation data and sharper PPI deflation.

Gold ticked up, keeping above the July top at $2483. Yields fell but the dollar gained. There are roughly 110bps of Fed rate cuts priced in for this year.

Day Ahead – UK Jobs and the US Presidential Debate

Wage growth is the key number in the UK jobs data. Pay is set to slow further but still remains relatively elevated. That is keeping services inflation sticky and will likely deter the Bank of England from cutting rates next week. The unemployment rate is expected to tick one-tenth lower to 4.1%. However, this data is beset with reliability issues.

The first Presidential debate between Vice-President Harris and former President Trump will take place on Tuesday evening Eastern Time. This debate has taken on increased importance as Harris only began her presidential campaign about one month ago. The campaign has entered its most intense phase post-Labor Day and markets may become more reactive to polling data as the election grows closer. Traditionally, voters have made up their minds by this point in the race. But this race is rather exceptional, and the end result could end up having quite different implications for the Fed.

Chart of the Day – Cable dips to two-week lows

GBP/USD had a very strong August as prices rallied from lows below 1.27 to a high at 1.3266 late on in the month. But the major has dipped since, easing overbought conditions. The spike up to 1.3239 amid the NFP noise on Friday could not be sustained and cable slid to two-week lows yesterday. The bearish momentum suggests near-term downside risks, though broader underlying trend dynamics remain positive for the pound. Support is 1.3037 and initial resistance at 1.3135/40.