It’s no surprise then to see the USD (DXY) -0.4% across the board and US Treasury Yields down 4.0bps to 2.23%. The key for markets will be whether the Minutes represent a genuine “Break Me Shake Me” moment for the Fed’s dotpoints (title courtesy of Australia’s own Savage Garden) or whether the Fed remains committed to its rate hike trajectory. The market currently only prices a 36% probability of a December Fed rate hike and only 1.3 hikes are priced by the end of 2018 compared to the Fed’s dotpoints of 4.

On the Minutes, while “most” FOMC members still expect inflation to pick up over the next couple of years, “many” still see some likelihood that inflation might remain below 2% for longer than they currently expect and “several” indicate that the risks could be tilted to the downside. It’s clear from this that the FOMC is split on the trajectory for near term inflation and that the fed will be monitoring inflation developments “closely”.

While there is uncertainty around inflation, there was more consensus on the labour market which was assessed to be “close or below” its longer-run normal rate. In such a situation “a few” expressed concerns of the possibility of overshooting full employment. On the balance sheet, members noted that an announcement it could happen “relatively soon” and the Fed’s own survey notes the market expects a September announcement.

As for politics, President Trump disbanded two of his economic councils following resignations from a  number of CEOs (eight in the past week!). The disbanding of the councils comes as a surprise given the initial fanfare when they were created and marketing as helping to advance his manufacturing and infrastructure agenda. For the market, it’s another reason why Trump’s policy agenda is going nowhere fast soon – a point also made in the Fed Minutes where several participants noted uncertainty was tending to weight down firms’ spending and hiring plans.

In FX, there was broad US dollar weakness (DXY -0.4%). Topping the leaderboard were the commodity currencies with the Aussie +1.4%, Kiwi 1.1% and CAD +1.0%. The strength in the commodity currencies is partly a story of US dollar weakness, as well as from strength in industrial metal prices. The AUD currently sits at 0.7930 and whether it approaches 0.80 will likely hinge on today’s Employment report (see below for details).

Zinc rose 5.5% to be above $3,000 a tonne for the first time in almost a decade and Aluminium is approaching a three year high. Supporting commodities in recent days has been strong Chinese steel production, weakness in the US dollar and reports that China is acting to shut down illegal aluminium and steel plants to cut pollution levels and excess capacity. Zinc has benefited also from Glencore suspending some output in early 2017.

The other currency move worth noting is the Euro. While it is up 0.3% overnight, it initially traded lower by 0.4% on reports that Draghi would not deliver a new policy message at the Jackson Hole conference and will instead focus on the theme for the conference which is “Fostering a Dynamic Global Economy”.

The other major was in oil with the WTI oil price sliding 1.5% to $46.86 a barrel. IEA data revealed US crude production had hit its highest level since July 2015 at 9.5m, evidence that US shale oil producers continue to ramp up production and presenting a challenge to the OPEC’s oil production ceiling. Libya also noted it had increased production at its Sharara oil filed.

Coming Up

All focus domestically will be on this morning’s Employment/Unemployment figures (11.30am AEST). It’s a statistical lottery at the best of times and the market looks for employment growth of +20k and an unchanged unemployment rate at 5.6%. NAB thinks upside there is likely upside risk to the consensus given strong forward indicators to date (rising job ads and a strong NAB Business Survey) along with the possibility of an upward tilt from sample rotation. NAB accordingly forecasts employment of +25k m/m with still upside risk and a fall in the unemployment rate to 5.5%.

Your scribe will be watching the unemployment rate closely — the pace at which Australia approaches full employment (estimated by the RBA to be consistent with a 5% unemployment rat) will be a key driver in determining when the RBA begins to remove policy accommodation.

International focus will be on the ECB Minutes. Markets will be looking at any discussion around the Asset Purchase Program given the language was unchanged in the post-meeting statement despite the previous Minutes noting this item is being discussed (will it be modified in September and when will it begin?). Any hints of worry around the ongoing surge in the Euro will also be observed. Other Eurozone data includes the Trade Balance and the final version of CPI (currently 1.3% y/y for headline).

US data is mostly second-tier but worth watching with Initial Jobless Claims, Philly Fed (will this pick up too after the Empire?) and Industrial Production. Across the Ditch NZ has the ANZ Consumer Confidence report.

Overnight

On global stock markets, the S&P 500 was +0.14%. Bond markets saw US 10-years -4.91bp to 2.22%. In commodities, Brent crude oil -0.91% to $50.34, gold+0.6% to $1,282, iron ore -1.0% to $72.97, steam coal +2.6% to $97.45, met. coal +0.0% to $193.50. AUD is at 0.7928 and the range since yesterday 5pm Sydney time is 0.7808 to 0.7934.

For full analysis, download the report

• Markets Today: 17 August 2107 (PDF, 157kb)

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets

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