• Fed minutes reveal some members wanted a July cut

• Nonfarm payroll growth revised down by the most since 2009

• PMIs in focus ahead of Powell’s Jackson Hole speech

• Wall Street gains ground, oil extends slide

Dollar slips as traders ramp up Fed cut bets

The dollar extended its slide against its major counterparts on Wednesday, as the minutes of the July 30-31 Fed gathering revealed that officials are strongly leaning towards a September rate cut, with some members being willing to lower borrowing costs even at that meeting.

Given that the meeting was held before the July NFP report, which triggered turbulence and fears of a recession in the US, the minutes suggest that officials were keen to cut interest rates despite the US economy faring relatively well.

Prior to the minutes, a Labor Department report pointing to fewer jobs than initially estimated in the year to March may have also encouraged some dollar selling. The report pointed to a downside revision in payrolls by 818k, the steepest since the global financial crisis.

With all that in mind, investors pushed the probability of a 50bps rate cut in September up to 35% and the total number of bps worth of reductions by the end of the year to 105.

All eyes will now turn to Fed Chair Powell’s upcoming speech at Jackson Hole on Friday, especially in light of yesterday’s developments. Investors may be eagerly awaiting clues and signals regarding the size of a potential September cut, as well as fresh information about the state of the labor market and the overall economy.

All eyes will now turn to Fed Chair Powell’s upcoming speech at Jackson Hole on Friday

They may get an early glimpse of how well the economy did in August from today’s preliminary S&P Global PMIs.

Eurozone and UK PMIs, BoJ Gov. Ueda’s testimony

The Eurozone and UK PMI data are also on today’s agenda. The Eurozone figures have been already released, revealing improvement and confounding expectations of some softness. Yet, the euro remained unfazed as traders are still convinced that the ECB will cut interest rates by another 25bps in September.

In the UK, there is a strong 73% chance for the BoE to take the sidelines at its upcoming meeting, and should the PMIs reveal some improvement as expected, that probability could stay elevated, helping the pound remain in uptrend mode.

Dollar/yen traders may start their Friday early as, ahead of Powell, BoJ Governor Ueda will testify before parliament on the BoJ’s decision to raise interest rates at its latest meeting.

Following contradicting signals from Japanese policymakers recently, traders may seek more clarity on the Bank’s way forward. Currently, they are assigning a nearly 60% chance for another 10bps hike by the end of the year.

Following contradicting signals from Japanese policymakers recently, traders may seek more clarity on the Bank’s way forward

Equities cheer prospect of lower rates, oil slips

Wall Street closed in the green yesterday, in a sign that the traditional pattern of “bad news is good news” is back in play as the discouraging labor market data did not upset participants this time. Perhaps the post NFP data suggesting that the US economy is not on the verge of a recession reassured investors and allowed them to cheer again the prospect of lower interest rates soon.

Perhaps the post NFP data suggesting that the US economy is not on the verge of a recession reassured investors

Some degree of concern may have been reflected only in oil prices, which slid perhaps on demand worries. Strangely, developments in the Middle East appear to have passed unnoticed. A Greek-flagged oil tanker was lost in the Red Sea yesterday following repeated attacks, while US Secretary of State Antony Blinken’s trip to the Middle East ended without any accord between Israel and Hamas, and yet no fresh supply-related fears were imprinted in oil prices.