Currency markets are caught in the August doldrums this morning, with most major exchange rate pairs stuck in windless ranges as traders head out on summer vacations. Yields are flat and the dollar is moving almost imperceptibly as hawkish Federal Reserve officials engage in a tug of war with fearful investors, and risk-sensitive currencies are largely becalmed.

Falling US gasoline demand is weighing on global crude benchmarks. Data released by the Energy Information Administration yesterday showed the four-week average of gasoline consumption had fallen 1 million barrels below pre-Covid levels for this time of year. West Texas Intermediate is trading for $91 a barrel and Brent for less than $97 – both down sharply from a week ago.

The Brazilian real stabilized after the central bank raised its benchmark interest rate as expected and said it might consider a 13th consecutive move in September. Implied volatility rose slightly overnight, but the Selic lending rate is now at 13.75 percent, and swaps pricing suggests it won’t go much higher in this tightening cycle.

The Bank of England delivered its biggest hike in 27 years, raising rates 50 basis points as it warned growth would slump and inflation would remain elevated in the months to come. Central bankers maintained a pledge to act “forcefully” against inflation, but also noted that “policy was not on a preset path”. Eight of nine rate-setting officials voted for the move, with Silvana Tenreyro the lone dissenter, opting for a smaller 25 basis-point hike.

The pound fell as the gloomy outlook weighed on gilt yields. Updated forecasts show the economy contracting 1.25 percent next year, with year-over-year price increases peaking at 13 percent this year before falling to a still-extreme 9.5 percent by the third quarter of 2023.

Jobless claims are seen rising to 260,000 in the week ended July 30, up slightly from 256,000 in the prior week. Employment data is slowly regaining its importance as market watchers wait for the next shoe to drop in the US economy’s slowdown.

The US trade deficit is expected to shrink, from $85.5 billion in May to just over $80 billion in June as consumers spend more on services and less on products manufactured overseas.

Traders remain cautious going into tomorrow’s non-farm payrolls report. Economists polled by the major data providers think the US added 250,000 positions in July, down from 372,000 in June – but there are major uncertainties on both ends of the spectrum, with consumer demand remaining strong even as sentiment levels weaken.