Markets have started Tuesday on a cautious footing as investors continue to assess last week’s weaker than expected U.S. jobs report, which has reduced expectations for further Federal Reserve rate hikes this year.
The Japanese Yen remains firmly in focus, hovering near a 40 year low against the U.S. Dollar and its weakest level against Sterling since 2007. Investors remain wary of possible intervention from Japanese authorities after speculation increased last week that Tokyo could step in to support the currency. While the Yen found some support towards the end of last week, no official action has been taken so far, leaving investors on alert for any shift in Japan’s strategy.
In the broader market, the U.S. Dollar has steadied after recent losses as investors continue to pare back expectations for further Federal Reserve rate hikes following last week’s disappointing jobs report. Markets are now pricing in around 29 basis points of additional tightening by December, down from roughly 38 basis points just a week ago.
Attention now turns to tomorrow’s release of the Federal Reserve’s June meeting minutes, where investors will be looking for further clues on the outlook for U.S. interest rates. While Fed Chair Kevin Warsh has previously indicated he prefers not to provide strong forward guidance, the minutes should offer a better insight into how policymakers are assessing inflation and the path of monetary policy.
Elsewhere, Sterling briefly rose to a more than two week high against the Dollar before easing slightly, while the Euro edged lower in early trading. Overall, markets are expected to remain relatively subdued today as investors await tomorrow’s Federal Reserve minutes and continue to monitor developments in Japan.
GBP/EUR 1.1697 GBP/USD 1.3379 GBP/AED 4.9160
GBP/AUD 1.9280 GBP/CHF 1.0785 GBP/CAD 1.9026
GBP/NZD 2.3408 EUR/USD 1.1423 GBP/ZAR 21.7304