The USD is mixed to slightly softer in subdued FX trading this morning. Firmer stocks, slightly softer bonds and some gains in key commodities (crude, copper, iron ore) are all fairly orderly as investors await this morning’s developments, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD trades narrowly mixed versus majors

“The ECB policy decision and the next round of US economic data are due today. The US releases PPI and weekly claims at 8.30ET. PPI is expected to rise 0.1% in August, with core PPI expected to gain 0.2%. Subdued data may not have much impact on trade but, after the market’s reaction to the slightly higher core CPI M/M reading yesterday, minor data surprises clearly have the capacity to roil markets that are eager for clarity, one way or the other, on the near-term Fed policy outlook.”

“The minor CPI miss further dampened market expectations of an aggressive Fed rate cut next week. Underlying inflation pressures are moderating and the Fed’s attention is focused more intently on jobs now. The July FOMC minutes showed that ‘several’ policymakers thought progress on inflation and the deterioration in the labour market provided a ‘plausible case’ for a 25bps cut and that they could have supported such decision to cut back then. Labour market conditions are, net of revisions, even weaker now so there may still be a case to argue for a bold move next week even if a more measured outcome looks most likely.