The US dollar falls, led by sterling. The price is testing $1.36 barrier, which has slowed growth in previous months. Most developing market currencies are stronger today. The Mexican peso hit a new annual high as the dollar approached MXN18.40. Today’s appeals court verdict on President Trump’s dismissal of Federal Reserve Governor Cook may be released before tomorrow’s FOMC meeting, where a 25 bp rate drop is expected for the first time this year.

Equities are mostly higher. Europe’s Stoxx 600 recovers after a pre-weekend drop. Index futures for the US differ slightly. Average European 10-year rates have fallen 2-3 basis points. French bonds underperformed after Fitch’s downgrading before the weekend. Spanish and Portuguese rates have lead since their rating improvements, while Italian yields have dropped almost as much. The 10-year Treasury yield, which dropped below 4% last week, is now about 4.06%. Gold is consolidating after hitting a record high under $3675 on Tuesday. After a turbulent range before the weekend, October WTI is presently trading solidly between $62.50-$63.25. The Dollar Index is trading in a 20-tick range over 97.50 today. The Dollar Index has mostly maintained its range since September 5, when August employment data was announced, with a few deviations early last week. After Fed Chair Powell’s Jackson Hole address on August 22, DXY has a down channel. The parameters are between 97.15 and 98.45 today, down 10 ticks this week. With the September NY State manufacturing survey released today, the week begins slowly.

Tomorrow, August retail sales and industrial output will be released before the FOMC meeting on Wednesday. President Trump wants a federal appeals court to rule quickly on his appeal against the lower court’s decision to block him from firing Federal Reserve Governor Cook. Today’s personal and corporate tax deadline puts pressure on some money markets due to this and last week’s auction settlement. The euro is trading consistently inside a narrow range after testing last Thursday and Friday’s highs at $1.1750. At ~$1.1650-$1.1760, the euro has remained substantially within the range witnessed on September 5, US jobs day. The implied volatility is under 7% for three months and 6.5% for one month, which is expected before a major move. Fitch lowered France’s rating to A+ from AA-, upgrading Portugal to A from A-, and S&P raising Spain’s to A+. Market reaction is low. Early today, the euro zone published its July trade surplus. The seasonally adjusted surplus was 5.3 billion euros. Market sensitivity is low in this research. Compared to H1 24, the H125 trade surplus fell 8.5%. After last week’s ECB meeting, five G10 central banks will meet in the next days, making the euro area less prominent. Germany’s ZEW poll will be issued tomorrow. We regularly track the US-German two-year rate discrepancy. At 155 basis points, the US premium is at a year-low and the lowest since September. Fed Chair Powell’s August 22 Jackson Hole speech reduced the margin by little over 25 basis points.

From early May to late July, the dollar fell 1.5% versus the offshore yuan. The currency has fallen 1.0% against the offshore yuan since August 1. The dollar touched an annual low of CNH7.1120 last Thursday. Although it rose somewhat today, the PBOC is cutting its daily reference rate to manage the dollar. Prior to the weekend, it was CNY7.1019, now CNY7.1056. August statistics from China was revealed today. New and used home values have fallen, while retail sales and industrial production have slowed year-to-date and year-over-year. Residential property sales and investment activities remain poor. Fixed asset investment fell to 0.5%, the lowest since the pandemic, meeting predictions if the anti-involution effort worked. Finally, Beijing has launched two probes into US chips and preliminarily found that Nvidia violated antitrust rules during its 2020 acquisition of Mellanox Technologies.

The dollar and Japanese yen traded within the previous session’s range before the weekend. Stronger US rates stabilized the dollar. Price range remains same from last Thursday. Japan has few data releases until midweek, when the July tertiary industry index and August trade balance are released. The Thursday-Friday BOJ meeting is the big event this week. The position remains unaltered, but Governor Ueda’s future direction will be scrutinized. He likely believes that if the economy grows as expected, rates may rise. Sterling reaches $1.3600 barrier. It has been below that threshold for two months and rejected three times. Next, breakthrough might target $1.3635. Last Thursday, support was found beneath $1.3500 and the 20-day MA. The UK jobs report and CPI are due tomorrow and Wednesday, respectively, before the Bank of England meeting on Thursday. BOE may stay on hold till Q1 26. The focus may move to curbing Gilt sales. Eight of the past 10 sessions before today have seen the dollar rise versus the Canadian dollar. The Canadian dollar was the poorest G10 currency against the dollar in September, falling 0.75% in the first two weeks. Lack of US dollar selling after Thursday’s technical reversal stabilizes the greenback above the 20-day moving average. On the weekend, Prime Minister Carney announced the formation of a C$13 billion agency to build affordable housing. Modern housing statistics, manufacturing, and wholesale sales seldom affect the market. The August CPI report is coming tomorrow and the central bank meeting is on Wednesday, making the issue very important. The Bank of Canada may decrease its overnight rate goal to 2.50% from 2.75% hours before the FOMC.

The Australian dollar rose 3.5% versus the US dollar last week, establishing a new annual high. After surpassing $0.6670, it stalled before the weekend. The market is solid despite no major developments. The three months ending in July saw full-time employment rise by 21k, compared to 7k in the previous three months, despite a decrease in overall growth. The Reserve Bank of Australia is more cautious due to labor market stability and rising spending. The futures market year-end rate has grown by 30 basis points since early July, with roughly half of that increase since mid-August. Mexico’s economic calendar is light this week. The sinking US dollar and lower US interest rates drove the peso to a new annual high last week. This explains the Brazilian real and Colombian peso’s recent annual highs. Peso rose marginally today. Dollar-based investors will still prefer Mexico’s interest rate advantage if it reduces later this month, especially after July industrial production fell 1.2%. For the previous month and a half, the dollar has ranged between MXN18.51 and MXN19.00, mostly below MXN18.80. It broke down to almost MXN18.4380 last week. Value dropped to almost MXN18.4150 today. In Q4, MXN18.18 may be the next technical objective after MXN18.40.