MNI US MARKETS ANALYSIS - Jobless Claims to Take Spotlight

MNI (LONDON) - Highlights:

• Jobless claims in focus given recent spotlight on US labor market
• GBP/USD well clear of bull trigger on solid PMIs
• Jackson Hole sees welcoming remarks, but main speeches set for Friday

US TSYS: Modestly Cheaper, Jobless Claims And Flash PMIs In Focus

• Treasuries have sold off across the curve in European hours, aided by stronger EZ PMIs despite concerns of being boosted by temporary Olympics-related services strength from France. There is also arguably a supply chain pressure angle, especially at the front end, as major Canadian rail strikes went ahead today even if they weren't likely a complete surprise.
• Today's focus is on jobless claims - with initial claims covering a payrolls reference period - and flash PMIs but there are also various FOMC appearances throughout the session.
• Cash yields are 2.1-3.4bps higher, led by 3s. The front end to belly remains within yesterday's range but longer-dated yields are breaking higher after yesterday's bull steepening with 2s10s at -13.6bps.
• TYU4 at 113-17 (- 11) is at the low end of yesterday's range having pulled back from its high of 114-01 whilst volumes are elevated at a cumulative 390k but boosted by roll activity.
• The trend needle still points north despite the overnight decline. Resistance is seen at 114-03 (Aug 6 high) before 114-16 (Fibo retracement of Aug 5-8 pullback).
• Data: Weekly jobless claims (0830ET), Chic Fed national activity Jul (0830ET), S&P US prelim Aug (0945ET), Existing home sales Jul (1000ET) and KC Fed mfg Aug (1100ET)
• Fedspeak: Schmid on CNBC (0730ET), Collins on Fox Business (approx. 0830ET), Harker on CNBC (1000ET).
• Note/bond issuance: US Tsy $8B 30Y Tips reopen auction (1300ET)
• Bill issuance: US Tsy $95b 4- and $90b 8W bill auctions (1130ET)

STIR: Back Close To 100bp Of Fed Cuts To Year-End

• Fed Funds implied rates have lifted a little further above pre-FOMC minutes levels, with 1.5-3bp increases on the day with help from services-led  surprise strength in Eurozone PMIs.
• Cumulative cuts from 5.33% effective: 33bp Sep, 68bp Nov, 101bp Dec, 128bp Jan and 189bp Jun.
• It's rate path close to where it was before yesterday's preliminary payrolls benchmark revisions, with the 101bp of cuts to year-end vs 106bp shortly after the minutes.
• The FOMC minutes showed "several" members had already deemed it "plausible" to cut in July and a "vast majority" were ready to cut at the September meeting. In keeping with the change of focus in the statement toward employment risks, the July Minutes suggest that cautionary voices on cuts were outnumbered by those who highlighted risks of cutting too little, too late.
• Today sees jobless claims, flash PMIs and less so existing home sales in the driving seat although Boston Fed's Collins ('25 voter) also speaks on Fox Business at ~0830ET.
• She said Aug 9 (post-payrolls, pre-CPI) that it will be appropriate to begin  easing "soon" if data come in as expected with the timing and pace of cuts to be based on data. The labor market remains strong even though the latest jobs data came in softer than predicted.

FED: Context Ahead Of CNBC Appearances For Schmid and Harker

• We touched on recent remarks from Collins ('25 voter) earlier but note the above CNBC appearances from Schmid ('25, 0730ET) and Harker (non-voter, 1000ET).
• Schmid, who we see at the more hawkish end of the FOMC spectrum, said Aug 8 (post-payrolls, pre-CPI) that it will be appropriate to cut if inflation continues to come in low. The inflation target is close but "not quite there" and the labor market still appears broadly healthy with growth and demand still strong despite the July jobs report.
• Harker, more dovish leaning, last spoke some time ago on Jun 17 saying there wasn't even close to a material deterioration in the job market (he'd have seen the u/e rate at 4.0% in May vs 4.3% as of Jul) but already acknowledging that upside and downside risks to policy were becoming more balanced.

CANADA/US: Major Rail Strike Goes Ahead, Risk Of Longer Lasting Frictions

• Canada's rail strike has indeed gone ahead with more than 9,000 employees at CN and CPKC locked out, the first time in decades that workers at both companies have simultaneously walked out.
• Rail cargo is most pertinent for wheat, fertilizer, chemicals and lumber but automakers have also raised concerns.
• It sees a shutdown of lines carrying about C$1bn/day in trade between the US and Canada, whilst latest estimates of costs came from Moody's yesterday at circa C$340m/day.
• Potential costs should be non-linear though, with analysts seeing limited macro impact if strikes are kept to a week as inventories can be drawn upon but of increasing significance if longer lasting.
• This could be understating the impact though as shipments of some perishable items to Canada had already been diverted to the US from Monday (and some did so as early as May when rail workers initially voted in favor of a strike), exacerbated by a union of 730 dock foremen in BC - home to the busiest port in Vancouver - also threatening to strike.
• It builds on the damage caused by a 13-day strike of more than 7,000 workers across Canadian western ports in July 2023 (seen at the time taking a tenth off monthly GDP).
• What's more, these rail strikes coincide with talks covering about 45,000 dockworkers at ports through Houston to Boston being called off earlier this year and potential for a strike if no deal is reached before Sep 30.
• The combination of large strikes in a relatively short window along the west coast and threats of strikes on the east coast carries a real threat of driving longer-lasting frictions in US and Canadian supply chains.

FOREX: PMIs Tip GBP to Top of G10

• European PMI numbers from across France, Germany as well as the UK painted a picture of a solid services sector, and slightly lagging - but resilient - manufacturing. The UK numbers were a particular highlight, as both services and manufacturing topped forecasts, helping GBP/USD extend recent outperformance to hit a recovery high of 1.3129 ahead of the NY crossover. 1.3142 provides the next key level, the bull trigger located at the mid-July'23 high.
• CHF also trades well, and is the firmest performer in G10 FX. EUR/CHF has printed a fourth consecutive session of lower lows as funding currencies more broadly gain a tailwind from the dovish repricing of the Fed policy outlook. This contrasts, however, with the JPY - which is more rangebound alongside an MNI interview with former BoJ board member Sakurai, who sees no space for the BoJ to raise rates further until Q1 next year.
• Weekly jobless claims data from the US takes focus going forward, as well as the flash reading for US PMI. The sensitivity of markets toward US labour market data has increased in recent weeks, and today's release will also be gauged in the wake of yesterday's CES revisions - which saw a benchmark revision of -818k jobs.
• The Jackson Hole Policy Symposium officially kicks off today, with welcoming remarks and opening events scheduled - nonetheless, the key speeches are set for tomorrow, as both the Fed Chair Powell and BoE Governor Bailey make appearances.

CHF: Focus Remains On External Drivers Until Swiss CPI

EURCHF has printed lower lows for a fourth consecutive session as the corrective pullback off mid-August highs continues. Today's US jobless claims data and Powell's appearance at Jackson Hole on Friday (1000ET/1500BST) provide points of interest here - and more hawkish than expected outcomes could bring the prevailing trend of a weaker greenback / lower yields to a halt, which might yield some pushback on the recent CHF strength.

• CHF's status as a funding currency remains the key driver, underpinned by CHF's co-movement with the JPY during recent market turbulence. This leaves initial focus on external drivers - particularly as the Swiss calendar provides little input until the next CPI release on Sept 3rd, however we expect focus to shift to the Sept 26 SNB meeting thereafter, for which around 32bps of easing are priced.
• Levels to watch on EURCHF remain 0.9440, the 38.2% retracement for the upleg off 0.9211 - the multi-year low, and 0.9575, the August 15 high, around which the crossing of the 50/200DMAs supported the move lower afterwards.
• On SNB intervention risk, analyst views appear a bit mixed: Goldman Sachs have recently noted some potential intervention "curbing CHF strength during the market turbulence" of early August, while JP Morgan rather saw a "lack of major pushback from the SNB" re Franc strength. That being said, intervention risk at current levels of around 0.9481 appear limited.

OPTIONS: Expiries for Aug22 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0905-20(E1.8bln), $1.1040-50(E801mln), $1.1065-80(E869mln),  $1.1100-20(E2.5bln)
• USD/JPY: Y145.70($1.2bln), Y146.20($1.1bln), Y148.00($1.1bln),  Y148.65($1.5bln)
• EUR/GBP: Gbp0.8475-85(E1.1bln)
• EUR/JPY: Y159.95-00(E1.4bln)
• AUD/USD: $0.6630-50(A$2.6bln), $0.6660-70(A$1.2bln), $0.6750-60(A$839mln)
• NZD/USD: $0.5940-55(N$1.3bln)

EQUITIES: E-Mini S&P Trading at Recent Highs, Bullish Theme Intact

• Eurostoxx 50 futures have traded higher this week  and the pair is holding on to its latest gains. The contract pierced the 50-day EMA, at 4868.98. An extension higher would undermine the recent bearish theme and highlight a stronger reversal. This would open 4951.00 next, the Jul 31 high. For bears, a reversal lower would refocus attention on the bear trigger at 4494.00, the Aug 5 low.
• S&P E-Minis are trading at their recent highs and a bullish theme remains intact. Price has cleared resistance at 5600.75, the Aug 1 high and this signals scope for an extension towards key resistance and the bull trigger at 5721.25, the Jul 16 high. A break would resume the primary uptrend. On the downside, support to watch lies at 5482.67, the 50-day EMA. A clear break of it is required to instead highlight a potential bearish threat.

COMMODITIES: WTI Futures Extend Bearish Reversal

• WTI futures have been unable to hold on to recent gains and the contract has traded lower this week, extending the bearish reversal. The latest move down exposes key support at $70.88, the Aug 5 low and the bear trigger. A break would resume the downtrend that started Apr 12. On the upside, initial resistance to watch is $75.25, the 20-day EMA. Key short-term resistance has been defined at $78.54, the Aug 12 high.
• Gold remains in a bull-mode condition and this week's fresh cycle high reinforces current conditions. The recent breach of resistance at $2483.7, the Jul 17 high, confirmed a resumption of the primary uptrend. Note that moving average studies remain in a bull-mode set-up and this continues to highlight a dominant uptrend. The focus is on a climb towards $2536.4 next, a Fibonacci projection. Initial support to watch lies at $2452.8, the 20-day EMA.

Date	GMT/Local	Impact	Country	Event
22/08/2024	1130/1330		EU	Account of ECB MonPol meeting in July
22/08/2024	1230/0830	***	US	Jobless Claims
22/08/2024	1230/0830	**	US	WASDE Weekly Import/Export
22/08/2024	1345/0945	***	US	S&P Global Manufacturing Index (Flash)
22/08/2024	1345/0945	***	US	S&P Global Services Index (flash)
22/08/2024	1400/1600	**	EU	Consumer Confidence Indicator (p)
22/08/2024	1400/1000	***	US	NAR existing home sales
22/08/2024	1430/1030	**	US	Natural Gas Stocks
22/08/2024	1500/1100	**	US	Kansas City Fed Manufacturing Index
22/08/2024	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
22/08/2024	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
22/08/2024	1700/1300	**	US	US Treasury Auction Result for TIPS 30 Year Bond
23/08/2024	2301/0001	**	GB	Gfk Monthly Consumer Confidence
23/08/2024	2330/0830	***	JP	CPI
23/08/2024	0600/0800	**	SE	Unemployment
23/08/2024	0645/0845	**	FR	Manufacturing Sentiment
23/08/2024	0800/1000	**	EU	ECB Consumer Expectations Survey
23/08/2024	1230/0830	*	CA	Quarterly financial statistics for enterprises
23/08/2024	1230/0830	**	CA	Retail Trade
23/08/2024	1230/0830	**	CA	Retail Trade
23/08/2024	1400/1000	***	US	New Home Sales
23/08/2024	1400/1000		US	Fed Chair Jerome Powell
23/08/2024	1400/1000	***	US	US Fed Chair Speech
23/08/2024	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
23/08/2024	1900/2000		GB	BOE's Bailey Speech at Jackson Hole