US markets unsettled ahead of Labor Day weekend
FX markets were hit by a whirlwind heading into the US Labor Day long weekend. While the key personal consumption expenditures (PCE) price index met expectations at 2.9% year-on-year, it still sparked enough concern to shake investor confidence.
The PCE is the Federal Reserve’s preferred measure of inflation and the high reading caused the pricing for a US rate cut to fall from 89% to 82% while the Nasdaq led losses with a 1.2% fall on Friday.
Adding to the uncertainty, the US Court of Appeals rejected President Trump’s proposed tariffs, while speculation around Federal Reserve Governor Lisa Cook’s potential removal added further tension.
Despite Friday’s sell-off, US equities had hit fresh all-time highs on Thursday, highlighting the market’s resilience even amid rising volatility.
September has historically been a softer month for US equities, with negative returns 56% of the time and an average decline of 1.17% according to BofA. This seasonal weakness is often linked to year-end portfolio adjustments, especially with the US federal fiscal year ending on September 30. Only January and June have also averaged losses over the past 20 years.
Will a sell-off be enough to stir the Aussie from its lethargy? The Australian dollar remained stuck in a 64–66 US cent range throughout the Southern Hemisphere’s winter. The Aussie only broke out of this tight range twice—once to the downside after President Trump launched military strikes on Iran, and once to the upside following the announcement of the US–Japan trade deal.
Greenback slips in Asia as Fed’s Waller backs cuts; USD/SGD near decade lows
Fed Governor Christopher Waller is ramping up calls for rate cuts. He supports a quarter-point cut in September and expects more over the next three to six months. With inflation near 2% and signs of a weakening job market, Waller said the Fed should act now to manage risks.
“The time has come to ease policy,” Waller said, noting that long-term inflation expectations remain steady and the labour market could deteriorate quickly.
Meanwhile, USD/SGD is trading near the bottom of its one-month range, just 1% above its lowest level in a decade. With the Monetary Authority of Singapore possibly easing again in October, dollar buyers may see this as a window of opportunity.
Next key resistance levels are the 50-day EMA at 1.2858 and the 100-day EMA at 1.2935.
US non-farm payrolls to take the spotlight this week
The first week of September brings a packed economic calendar, with labour and growth data in focus for FX direction. On Friday, the US releases August nonfarm payrolls (consensus: +80k; prior: +73k) and the unemployment rate (expected to rise to 4.3% from 4.2%). Canada’s employment report is also due, following July’s net job loss of 40.8k and a jobless rate of 6.9%. These updates will be pivotal for expectations around the Fed and Bank of Canada’s next moves.
Earlier in the week, manufacturing data will guide risk sentiment. China’s August Caixin reading (expected: 49.7) is likely to remain below 50, signalling continued contraction. Key PMIs out Monday for the Eurozone (last: 50.5), Germany (49.9), France (49.9), and the UK (47.3) will offer more insight into global industrial momentum. The US ISM Manufacturing PMI (Wednesday) is forecast at 48.9, still in contraction territory.
Australia’s Q2 GDP (Wednesday; prior: +0.2% q/q, +1.3% y/y) and July trade balance (Thursday; prior: A$5.37bn) will be closely watched for AUD direction. Eurozone inflation (Tuesday; prior: 0.0% m/m) and Q2 GDP (Friday; prior: +0.1% q/q) round out the week’s key releases, with German and French factory and services data adding further detail. With no major central bank decisions scheduled, FX volatility will likely hinge on data surprises. Softening labour markets and sluggish PMIs may weigh on the USD and EUR, while commodity currencies will respond to Australian and Chinese figures. Expect choppy trading as markets recalibrate growth and policy outlooks.
USD back at lows after poor August
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 1 – 5 September
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
