US Dollar gets to keep gains for now after Jobless Claims paint a steady picture

• The US Dollar gets support from Kansas Fed President Schmid with hawkish tone. 
• Focus this Thursday on US PMI’s for August to provide some counterweight. 
• The US Dollar index trades just above 101.00 and could fall to 100.00 if weak sentiment persists. 

The US Dollar (USD) trades broadly flat after it saw heavy selling at the start of the US session on Wednesday, triggering another leg lower towards a fresh 2024 low. The Nonfarm Payrolls revision highlighted 818,000 fewer jobs than previously estimated, the largest downward revision in over a decade, confirming market concerns about the US job market. Later, the release of the Fed Minutes for the July meeting confirmed that some members of the Federal Open Market Committee (FOMC) vowed for a rate cut back then, making this move almost certain in September. 

Although it looks like nothing can go wrong, big warning signs still need to be issued here. The Federal Reserve and Fed Chairman Jerome Powell have already advocated plenty of times that the risk of cutting too soon is one of their biggest fears. With the preliminary August Purchasing Managers Index (PMI) numbers, any strong figures might dampen the hope for either a big cut in September or further cuts down the line. 

Daily digest market movers: Jobless Claims are back to normal

• Hit the breaks, no white flag just yet, according to Kansas Fed President Jeffrey Schmid. Schmid said in early US comments that there could still be a pickup in demand and that the overnight Nonfarm Payrolls revisions did not change his stance on monetary policy. The Fed has time to decide and needs to watch more data points first before pulling the trigger, according to Fed’s Schmid. A hawkish shift, away from the dovish tone the Fed Minutes delivered on Wednesday. 
• Markets are having difficulties to read the Purchasing Managers Index numbers from Europe. France saw an uptick in its Services PMIs driven by the Olympic Games taking place, while Germany saw its Services PMIs come in below expectations. The German Manufacturing component even fell further into contraction, which is bad news for Europe’s main economy. 
• At 12:30 GMT, the weekly US Jobless Claims saw revisions tune down the initial print:
  • Initial Jobless Claims went from 228,000 to 232,000. That same 228,000 was last week 227,000.
  • Continuing Claims went from 1.864 million last week to 1.863 million for this week. That same 1.864 million got revised down to 1.859 million. 
• At 13:45 GMT, S&P Global will release the US preliminary PMIs for August:
  • The Services index is expected to remain quite stable, falling to 54 from 55 a month earlier.
  • The Manufacturing index is not expected to move, remaining  in contraction territory at 49.6.
  • The Composite index is seen declining to 53.5 from 54.3.
• At 14:00 GMT, Existing Home Sales are due to come out. Seeing the recent sharp decline in mortgage applications from the Mortgage Bankers Association data released Wednesday, a decline in Existing Home Sales for July is expected as well. Sales fell by 5.4% the previous month.
• The Kansas Fed Manufacturing Activity tracker for August will be released at 15:00 GMT. The previous print was -12.
• European and US equities are in good shape again this Thursday, thriving on the dovish Fed Minutes from Wednesday in the assumption several cuts are on their way. 
• The CME Fedwatch Tool shows a 67.5% chance of a 25 basis points (bps) interest rate cut by the Fed in September against a 32.5% chance for a 50 bps cut.  Another 25 bps cut (if September is a 25 bps cut) is expected in November by 39.7%, while there is a 46.9% chance that rates will be 75 bps below the current levels and a 13.4% probability of rates being 100 basis points lower. 
• The US 10-year benchmark rate trades at 3.82%, off this week’s low for now.