Bitcoin Falls as Investors Cautious Amid Iran War Uncertainty, Ahead of Jobs Data — Market Talk

0719 GMT - Bitcoin edges lower as investors trade cautiously amid uncertainty over the Iran war and ahead of key U.S. nonfarm payrolls data at 1230 GMT. Media reports say Iran's semi-official news agency Fars on Thursday released details of a draft agreement between Iran and Oman that would ban U.S. and Israeli ships from transiting the Strait of Hormuz. The jobs data will be closely monitored given the potential impact on Federal Reserve interest-rate expectations. The market currently prices a 56% chance of a 25 basis-point rate rise at the September meeting and fully prices a move by December, LSEG data show. Bitcoin falls 0.2% to $64,301, according to LSEG. ([email protected])0704 GMT - Yields on eurozone government bonds rise due to oil prices moving higher as doubts set in over whether there will be a deal to reopen the Strait of Hormuz. A direct deal between the U.S. and Iran is yet to be concluded. Arab mediators working on a deal with Tehran said they fear Iran's diplomats, who are under pressure from the country's hard-liners, lack the clout to guarantee compliance even if an agreement is reached. Brent crude prices rise 1.2% to $83.45, after falling earlier in the week amid talks between Iran and Oman on reopening the strait. Ten-year German Bund yields rise 2.4 basis points to 3.144%, according to Tradeweb, as higher oil prices increase concerns about inflation. ([email protected])0650 GMT - Treasury yields edge higher while the dollar trades steady with the focus on the Iran war and the U.S. nonfarm payrolls report at 1230 GMT. "While Iran and Oman are reportedly close to a deal on reopening the Strait of Hormuz in return for providing Iran control over inbound traffic to the Gulf, the different parties still seem to disagree over what exactly such control would entail," Danske Bank's August Hyldgaard says in a note. If the payrolls data show another fall in the unemployment rate and/or rising wage pressures, this could boost interest-rate rise expectations, he says. The DXY dollar index trades flat at 99.947. The 10-year Treasury yield rises 0.4 basis points to 4.674%, according to Tradeweb.([email protected])0639 GMT - The dollar is expected to trade between 4.07 ringgit and 4.10 ringgit next week, with risks tilted toward modest strength for the Malaysian currency, Kenanga economists say in a note. Kenanga's baseline assumes continued negotiations to contain risks around the Strait of Hormuz without disrupting global energy supply. Softer U.S. labor market conditions and only modest inflation should reinforce Kenanga's view that the Federal Reserve remains on an extended pause. "This diverges from current market pricing of a September hike, and is the key swing factor behind our ringgit-strength bias," Kenanga says. The dollar is flat at 4.0850 ringgit.([email protected])0606 GMT - The New Zealand economy appears to have weathered the conflict in the Middle East fairly well but hasn't emerged totally unscathed, says Westpac chief economist, Kelly Eckhold. Recent labor market data this week confirms significant excess capacity remains which is helping to restrain inflation pressures, he adds. Nevertheless, inflation remains too high, and wage pressures appear sticky, raising questions on how easy it will be to bring inflation back to 2%. Eckhold notes that the Reserve Bank of New Zealand will likely need to do more than it currently suggests to achieve that, an assessment markets seem to share. ([email protected]; X @JamesGlynnWSJ)0540 GMT - The euro has room to rebound further against the dollar, based on charts, says Quek Ser Leang of UOB's global economics and markets research in a report. However, the euro must first exceed major resistance in US$1.1560-US$1.1565 zone, the senior technical strategist says. Upper boundary of daily Ichimoku cloud at US$1.1560 was tested a few times this week but remained intact, the strategist notes. Declining weekly trendline from January's high is currently near US$1.1565. If the euro surpasses and holds above the resistance area, it could extend gains toward June's minor peak of US$1.0622, the strategist adds. The euro is little changed at US$1.1521. ([email protected])0540 GMT - The case for the Reserve Bank of Australia to keep the official cash rate unchanged next week rests on the policy-setting board's view that settings are already a bit restrictive, says Antipodean Macro. The firm also notes that labor market conditions have eased slightly faster than expected, and that a weaker housing market poses downside risks to economic activity. Market pricing sees next to no chance of a rate hike next week, but there remains a nagging case to get the cash rate to a higher level, especially as the RBA didn't get the job done last year, it adds. ([email protected]; X @JamesGlynnWSJ)0529 GMT - Questions are being asked about when Japan's Ministry of Finance will intervene again to support yen. Some in the markets have pointed to the IMF's exchange rate regime classification as a potential constraint, says Carol Kong, FX strategist at CBA. Under the IMF's framework, a currency may lose its free‑floating designation if there are more than three intervention episodes over a rolling six‑month period. Kong doesn't believe the MoF will be constrained by the IMF classification as it carries little practical consequence. The MoF will intervene if it judges yen moves to be disorderly, she adds. ([email protected]; X @JamesGlynnWSJ)0522 GMT - The U.S. dollar index traded in a tight range around 99.95 in a quiet Asian session. The focus now shifts to U.S. non‑farm payrolls for July, which is a key input into the timing of the Fed's eventual tightening cycle. The unemployment rate will need to fall further before the Fed will raise interest rates, says Carol Kong, FX strategist at CBA. CBA is forecasting the U.S. unemployment will hold steady at 4.2% in July. Markets are currently pricing around a 55% chance of a September hike by the Fed, but Kong says she expects the central bank to wait until December before starting a modest tightening cycle. ([email protected]; X @JamesGlynnWSJ)0519 GMT - An election in Australia's southern state of Victoria in November is being watched because it could deliver a message about federal voting patterns. An SMS Roy Morgan Poll show the Liberal-National coalition's primary votes rising to 26% this month from 24% in April, with Labor on 26%, up 0.5%. One Nation is attracting 23.5% support, down 1%. Crucially, the coalition is now ahead of the Labor government on a two-party preferred basis with 51% support compared with Labor on 49%. If an election were held now there would likely be a hung Parliament with great uncertainty about the results in many electorates, the poll shows. ([email protected]; X @JamesGlynnWSJ)0503 GMT - Australian financial markets are pricing almost no chance of an interest rate rise next week at the Reserve Bank of Australia's policy meeting. Still, there's scope for the central bank to sound hawkish, which could translate into some upward momentum for the Australian dollar, says Mahjabeen Zaman, head of FX research at ANZ. At the same time, there is little that can be said or done to drive a more dovish outcome than is already priced in, she adds. The main source of surprise could be the vote split. Any dissent in favor of a hike may add modestly to hawkish pricing, Zaman says. ([email protected]; X @JamesGlynnWSJ)0458 GMT - Indonesia's macro headwinds are likely to persist into 2H, BofA Securities economists say in a note. The country's latest growth and labor-market data suggest that the economy ended 2Q on a somewhat less-steady footing. Meanwhile, recent trade data points to a substantial widening of the current account deficit during the quarter. "As fiscal support fades, we expect GDP growth to moderate further in [2H], while the current account deficit is likely to remain wider than its usual norms," BofA says. ([email protected])