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The dollar is one one of its worst stretches in years as steady selling sends it to the lows of the year on many fronts.

Since the FOMC Minutes, the dollar is down rough 15 pips across the board as the comments in the report suggest a strong consensus on cutting rates.

Dollar selling has turned into a real momentum trade aside from the strong blip higher after retail sales. The market is arguing that the period of US outperformance may be coming to an end. I wonder if politics isn’t a factor in light if Harris’ improved chances. Even in defeat that could be enough to win the House and lead to gridlock. Conversely, Harris could win and Republicans control the Senate (there is a very high likelihood Republicans win the Senate).

But you can argue a whole host of factors, including the market saying “this is as bad as it gets for the global economy.” Rates are coming down everywhere and while there may still be some pain in the pipeline, rate cuts further out will mitigate it. AI is disinflationary and inflation expectations are good anyway. This could be the bottom of the economic cycle, which is wild to consider given that US equities are still close to record highs.

And if it is, then money will flow out of dollars to emerging markets and beaten-down cyclical assets elsewhere. I’m not on board with that thinking but it sure sounds like that’s what the market is shouting.

This article was written by Adam Button at www.forexlive.com.

Robert F. Kennedy Jr will make a speech in Phoenix on Friday morning, according to his campaign.

There is no detail about what he will speak about but his campaign said he will ‘address the nation’.

On Tuesday, his running mate said the campaign is considering whether to ‘join forces’ with Trump, who is also holding a rally on Friday in Arizona.

Should he drop out, it would be a boost to Trump’s election chances.

This article was written by Adam Button at www.forexlive.com.

Bond bulls are happy, stock market bulls are happy and gold bugs are dancing in the streets. Everything is rallying right now as the market prices in a good economy, rate cuts and immaculate disinflation.

Meanwhile, oil bulls haven’t been invited to the party.

Crude tried to stage a rally and was up nearly $1 at point point in US trading but is now down $1.23 after a tighter US inventory report failed to sustain gains. Barring a miracle turnaround, this will be the fifth straight day of selling and the first settlement below $72 since January.

There is still some hope for the bulls as the intraday low on August 5 was $71.61. Mind you, that was at a time when it looked like world markets were imploding, so it’s not exactly comforting.

One drag is the seasonal setup. Sept-Nov is traditionally the worst time of the year for WTI and we’re just approaching the dawn of that.

Otherwise, oil bulls are frustrated because there isn’t a clear catalyst for the move. Global inventories are tighter than any time in the past five years and continuing to draw. OPEC is staying disciplined, demand indications are fine, China has floated stimulus again and production is flattening.

A big worry is the plan to bring on OPEC supply late this year and the message is that those planned production returns might need to be delayed through Q1. If so, that could prompt a quick turn because the spec market is extremely short.

Finally, it looks as though the Middle East situation has calmed down and that premium has been removed so I don’t see that as a fresh potential source of downside pressure.

In any case, whatever is driving the move has oil bulls feeling sick and I expect that will lead to a puke soon; if not there could be a real bounce because it’s tough to square what’s happening in oil with other markets.

This article was written by Adam Button at www.forexlive.com.

We’re getting the point where we need to really zoom out to paint a picture of the foreign exchange market. A great example is in cable, where the daily chart illustrates that we’re only 60 pips away from the July 2023 high.

If that breaks, then the weekly chart highlights minimal resistance up to the 1.36 zone.

The pound initially fell after the July 24 election but it’s since recouped all those losses and more. Kier Starmer’s government is off to an uneven start but will offer stability over the next 4-5 years at a time when the US outlook is far less certain and Europe continues to be a mess.

The UK economy isn’t strong by any means but it’s plodding along and the Bank of England has some room to cut rates. The market sees only a 35% chance of a cut at the Sept 19 meeting but is fully priced for a cut in November (26 bps).

The main driver of cable strength lately is the US dollar side as USD broadly weakens as the market senses a long rate-cutting cycle and lower rates. The market may also be sensing a split congress in light of Kamala Harris’ polling gains. That should lead to a much-tighter US fiscal picture and possibly a rise in corporate tax rates.

This article was written by Adam Button at www.forexlive.com.

• Prior was 4.466%
• Bid to cover at 2.54 vs 2.68 prior

Bonds were bid ahead of the sale but there was a small concession in the 15 minutes beforehand. That put the market in a good spot as there is no real surprise here. In the bigger picture though, it shows real demand at yields much lower than last month.

This article was written by Adam Button at www.forexlive.com.

US 20-year bonds are for sale today and the auction comes at a time when investors have been particularly bullish on duration.

The most recent sale of 20s was at 4.46% and we will surely crack that with the on-the-run issue trading at 4.16%.

Twenty-year bonds do offer some value with 30s at 4.06% but it’s not clear who will step up and fill that gap.

This is a $16 billion sale and comes after a 2.9 bps tail at the most-recent 30-year sale. But on the positive side, the past 5 sales of 20s have stopped through and by an average of 1.5 bps.

This article was written by Adam Button at www.forexlive.com.

The bleed lower in the US dollar has extended and the euro is taking full advantage. It’s just edged above the December 2023 high of 1.1139 and is now trading at the highest since July 2023.

The latest move is almost entirely driven by the dollar side of the equation as it sinks across the board as the market senses a long series of rate cuts lining up, particularly after the BLS revised away 818K jobs.

This article was written by Adam Button at www.forexlive.com.

On the day:

• Stoxx 600 +0.3%
• German DAX +0.5%
• Francis CAC 40 +0.5%
• UK’s FTSE 100 +0.1%
• Spain’s IBEX +0.2%
• Italy’s FTSE MIB +0.7%

Yesterday halted a nice winning streak but the bulls were back in charge today:

This article was written by Adam Button at www.forexlive.com.

The release of the US benchmark revisions to employment for the year ending in March were something of a mess and the market clearly doesn’t know what to do with it.

There was an odd spike in USD/JPY when the numbers should have been released, followed by all kinds of rumours before the -818K number was finally released.

Then stocks ripped higher but are now below pre-data levels and bonds are bid but not as strong as before.

Here is the positive view on 818K job losses:

1) It gives the Fed cover to cut rates

If the case for a September cut and 3 cuts on the dot plot wasn’t strong, it’s stronger now.

2) A lower base

So going into the year through March, there were 818K fewer jobs. Maybe now that clears the way for the economy to add 818K jobs without creating more inflation than we already have.

3) Illegal immigration skews everything

This isn’t positive but we don’t know what we don’t know. Could there have been 818K illegal immigrants hired in a year? Maybe. No one fully knows what’s happening at the border, how many people are crossing and how many are working. At the end of the day though, the Fed has to use the numbers it’s given and can’t make policy based on illegal immigration vibes. It certainly makes their job tougher but you have to play the hand you’re dealt and -818K is objectively bad.

4) The economy did fine with 818K fewer jobs

Okay, so the jobs market wasn’t as strong as thought. So what? GDP growth was good and corporate profits were great. What’s the problem with a few less employees? Unemployment is still historically low and this keeps a lid on wages.

5) Inflation is dead anyway

US inflation is trending lower and it’s about to get even better. WTI crude oil is trading at $73.55 right now and that compares to a Sept-Oct 2023 range of $85-95. That’s going to create some very rosy y/y comps that will pull CPI to 2%, or very close. That also buys time for housing disinflation (or outright deflation) to work its way into the numbers, as those lag badly.

You square it all up and it looks like the coast is clear for the Fed to cut at every meeting until rates are at 3%. And if the outlook deteriorates, there is the option to go faster — a true Fed put.

The takeaway:

All this points to what the market has been saying for the past two weeks: Weaker US dollar, lower yields, stronger stock markets.

This article was written by Adam Button at www.forexlive.com.

Economists widely estimated that US non-farm payrolls would be revised lower from the prior numbers showing 2.9 million jobs added in the year ending in March, or 242,000 per month. Goldman Sachs had floated a range of 600K-1M job losses.

One critical caveat is that these revisions are based on a reconciliation with initial jobless claims, which don’t include illegal immigrants. Given the surge in border crossings, the non-farm payrolls numbers may be a better measure of actual job creation, because they aim to capture all hiring, including illegal immigrants.

This release was a mess as it was out more than 30 minutes later than expected and there were all kinds of rumours, including this one which was out way ahead of time.

I detailed the rumours and reports here.

In any case, the percentage revision to employment is 0.5%. The bulk of the losses were in professional and business services.

This article was written by Adam Button at www.forexlive.com.

• Prior was +1357K

This article was written by Adam Button at www.forexlive.com.