While we've been posting this morning about how the stronger-than-expected US jobs figures were putting pressure on the Fed to raise rates, certainly a proposition supported by bond traders, not everyone agrees.
US President Donald Trump was a noted dissenting voice in a Truth Social post, arguing that the data points to a rate cut.
While it's regarded as the first time Mr Trump has publicly leaned on his freshly minted Federal Reserve chair, Kevin Warsh, the president renewed his calls for lower interest rates, saying the FOMC (Federal Open Market Committee) should "get smart" and "be patriots for a change".
He then suggested, in a bit of a leap of logic, that if rates weren't cut, he'd order a halt to trading with any country running a surplus with the US, a course of action that was even "better than tariffs". Hard to imagine anything being better than tariffs, but there you are.
Here's the president's post (caps and grammar are his own):
"Great jobs number just announced, breaking all estimates (except mine!) by double and triple — And you haven't seen anything yet! EMPLOYERS ADDED 162,000 JOB IN AUGUST. Lower the interest rates because the U.S.A. is a much stronger credit than it was just a short time ago! A STRONG COUNTRY MEANS A LOWER INTEREST RATE — IT'S A BETTER CREDIT…Very simple! We should have the LOWEST RATE of any country in the World, like "the old days." Without the United States agreeing to allow them their big surpluses, and we could stop that immediately, they would no longer be considered financially ELITE! LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT, which the U.S. Supreme Court, in its ridiculous and very costly Tariff decision, strongly acknowledged "the President" has an absolute right to do. ITS BETTER THAN TARIFFS! The Fed Board, with its great new leader, must get smart — BE PATRIOTS for a change. High interest rates put the U.S.A. at a very unfair disadvantage, and I won't allow that to happen!" President DONALD J. TRUMP
Mr Trump later told reporters that the (Fed Funds) rate should be "one percent or half a percent" that he has a right to put tariffs on countries like Switzerland, that the US has effectively taken over Iran and that there are no mines in the Strait of Hormuz.
The Aussie dollar is expected to stay at about 72 US cents this week, according to CBA's FX strategy team.
In a morning note, CBA's senior currency strategist Christina Clifton said the Australian/US cross rate should remain steady, but a stronger-than-expected US core CPI reading will push AUD/USD back down to near 0.7150 later in the week.
"AUD/USD touched the highest since May last week on broad-based USD weakness. AUD/USD can remain near 0.7200 for most of this week, especially if Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter and Deputy Governor Andrew Hauser signal the need for another interest rate hike after the stronger-than-expected July CPI (Tuesday)," Ms Clifton said.
"However, we expect AUD/USD to ease back to near 0.7150 later in the week if we are right about our above-consensus call for the US core CPI."
If you're planning to travel (or export anything) this week, here are some of the CBA's other calls:
AUD/EUR will set a new year-to-date high above 0.6207 if RBA officials sound hawkish or the ECB is less hawkish than expected.
AUD/GBP will extend its recent uptrend on hawkish RBA remarks.
AUD/NZD could lift to a new year-to-date high above 1.2288 if RBA officials deliver hawkish comments this week.
AUD/JPY will trade around its 50-day moving average of 112.9 this week.
OPEC+ kept its oil output policy unchanged for October at its Sunday meeting. The producer group said in a statement this morning that it needs to agree on new quotas before deciding on its next output steps.
The meeting of seven core OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman — comes as the Iran war continues to disrupt oil exports through the Strait of Hormuz, limiting OPEC+'s influence over prices and market share.
In August, OPEC+ agreed to a production boost for September, completing a phased rollback of a 1.65 million-barrel-per-day supply cut first agreed in 2023.
Despite the agreed production increases, the group, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, still produces far below its targets because of the war.
"OPEC+ currently has very limited power over the physical oil market," Jorge Leon of Rystad Energy said.
"The group can change production targets on paper, but it cannot guarantee that those barrels will be produced or actually reach the market.
"The focus now shifts away from monthly production adjustments and towards the much more consequential debate over 2027."
Reuters
Australia:
Mon: Job ads (Aug)
Tue: Consumer sentiment (Sep), RBA commentary from deputy governor Andrew Hauser and asst gov (economics) Sarah Hunter
Thu: Inflation expectations (Sep)
International:
Mon: EU — GDP (Q2)
US — Labor Day holiday (markets closed)
Tue: JP — GDP (Q2)
CN — Trade balance (Aug)
US — Small business optimism
Wed: CN — Consumer (CPI) and producer (PPI) inflation (Aug)
Thu: EU — ECB rates decision
US — PPI (Aug), wholesale inventories (Aug)
Fri: US — CPI (Aug)
Once again, it is quiet on the home front, with the Westpac-Melbourne Institute reading of consumer sentiment (Tuesday) perhaps being the most interesting data point.
Sentiment bounced (but still remained pessimistic in August), largely thanks to mortgagors feeling a rate rise was more remote.
Stronger-than-expected GDP data and a return of chatter about a rate hike may test that mood.
The RBA top brass will be out and about on Tuesday, dealing with that chatter.
Assistant governor and chief economist Sarah Hunter will be at another "fireside" chat, this time atop an AFR property summit.
OHS issues at the ABC sadly prevent open fires in the studio, so deputy governor Andrew Hauser will have to make do with just a normal chat with 7.30 host Sarah Ferguson; hopefully it won't be too chilly.
Looking overseas, the ECB is expected to raise rates by 25 bps (Thursday) with both headline and core inflation running consistently above the target.
On Friday, US CPI could well be crucial in this month's Federal Reserve rate decision. Producer inflation data will be released on Thursday.
Fed governor Christopher Waller has said the September rate decision hinges on next Friday's CPI release.
While expectations are that headline inflation will ease a tad, rising fuel prices are having an impact. So it could be a close-run thing.
Investment bank Societe Generale says that while US headline inflation is expected to slow modestly to 3.3% (year-on-year), it will not be enough to dissuade the Committee from raising rates at its September meeting (much to the president's chagrin).
"Consistent with our revised outlook, we expect this move to mark the beginning of a three-hike cycle, with one rate increase delivered per quarter," Societe Generale said.
The three key Wall Street indices slipped on Friday as key jobs data came in stronger than expected, heightening speculation the Fed will raise rates later this month.
S & P 500: -0.4%
Dow: -0.5%
Nasdaq: -0.3%
US non-farm payrolls rose by 162,000 jobs last month against a forecast 56,000 gain. July jobs numbers were also revised up to a gain of 21,000 from the previously reported drop of 23,000. The unemployment rate held steady at 4.1%.
Two-year yields, which are particularly sensitive to changes in monetary policy, led the rise in Treasuries and were last up 4 basis points at 4.37%.
The yield on 10-year Treasury notes was up nearly 2 basis points to about 4.78%.
"Good news for the economy, but not such good news for those hoping the Fed will sit tight at the 16 September board meeting," IG Markets Tony Sycamore said.
Futures traders on the ASX 200 couldn't decide if it was good or bad news and remained on the fence.
When the market closed on Saturday morning (AEST), a fall of 1 point, or 0.01%, was priced in.
The moves were more definitive on the oil markets. The global Brent and US WTI benchmarks rose again as missiles and drones continued to whiz about the Strait of Hormuz.
Brent futures: +0.8% to $US92.68/barrel
WTI futures: +0.2% to $US91.48/barrel
Over the week, Brent rose 8%, while US crude gained 10%.
Reuters reported US diesel prices hit a record high leading into the weekend.
The rally in oil prices combined with a much steeper fuel price increase has pushed inflation and government borrowing costs higher around the world and intensified fears that global economic growth might pull back without some relief.
"All sectors of the economy are affected by diesel," Rystad Energy chief economist Claudio Galimberti told Reuters.
Oil prices may well take another step up today after US forces struck and disabled three Iranian oil tankers in response to Iran targeting two US warships with ballistic missiles.
The barrage was followed by a social media volley from US Admiral Brad Cooper.
Despite US Treasuries pushing the US dollar higher, the Aussie dollar was relatively unmoved and closed the week at 72.04 US cents, its highest weekly close in four months.
And gold slipped as the odds of a Fed hike in September shortened.
Copper posted its 10th consecutive week of gains and moved closer to its record high of $US14,527/tonne.
Iron ore also edged higher to just under $US100/tonne.
With Reuters
Good morning and welcome to another day on the ABC markets and finance blog.
Stephen Letts from ABC business team here, limbering up for blow-by-blow coverage of the day's events, where every post is hopefully a winner, but none should be construed as financial advice.
Wall Street closed the week on a negative note, with the S & P 500 slipping 0.4% and US bond yields edging higher after stronger-than-expected jobs figures shortened the odds of a rate hike from the Federal Reserve this month.
The ASX appears to be hedging its bets today.
When trading closed on Saturday morning, ASX 200 futures pointed to a flat opening.
However, that was before US forces struck and disabled three Iranian oil tankers in the Strait of Hormuz.
Data-wise it's a quiet day, with only the ANZ-Indeed job ads numbers coming out.
We'll be keeping a close eye on the Baltha Group creditors' meeting this morning.
The company is in hock to about $3.4 billion and its future is hanging by a thread, with administrators warning work across its vast portfolio of sites could stop as early as today.
As always, the game's afoot, so let's get blogging.
