US Dollar (USD) retraced some of yesterday’s losses and continues to trade within the narrow range seen since early August. Global bond and equity markets have stabilized. But China’s stock market sold-off on speculation the nation’s financial regulators are considering measures to cool the rally in stocks. China’s CSI 300 Index has surged more than 20% from April’s low, BBH FX analysts report.

China stocks slide on speculation of regulatory action

"Going forward, a dovish Fed policy stance can further weigh on USD and support risk assets. The decline in US job openings suggests that downside risks to employment are rising, reinforcing the case for a 25bps Fed funds rate cut in September. Job openings dropped more than expected to a 10-month low at 7181k (consensus: 7380k) vs. 7357k in June."

"In parallel, the September Fed Beige Book points to upside risk to the US inflation outlook and will likely keep the Fed on a cautious easing path. According to the Beige Book 'Most Districts reported that their firms were expecting price increases to continue in the months ahead, with three of those Districts noting that the pace of price increases was expected to rise further'."

"However, more evidence of a sharp decline in labor demand could push the Fed to prioritize maximum employment over price stability within its dual mandate. Tomorrow’s August non-farm payrolls print will guide whether markets start to price-in a 50bps Fed funds rate cut at the September 16-17 FOMC meeting or stick with the current 25bps rate cut bet. New York Fed President John Williams shares his view on the economic outlook and monetary policy (5:05pm London, 12:05pm New York). In his most recent interview, Williams signaled that 'every meeting is, from my perspective, live' for a policy rate move."