A terrible, horrible, no good, very bad summer in markets is coming to an ignominious end. The dollar is nearing its mid-July peak and Treasury yields are climbing after three consecutive days of selling contrived to crush a mid-August rally on global stock bourses.

Evidence of an economic slowdown is dissipating, fast. The Bureau of Labor Statistics said yesterday there were 11.2 million unfilled jobs in the US last month, amounting to two openings for each unemployed person. The Conference Board reported a sharp improvement in consumer confidence, with households saying they plan to buy more big-ticket items in the months ahead.

Expectations for the Fed’s next meeting are ratcheting higher. Markets are assigning 75 percent odds to a three-quarter-point interest rate hike in September, up from less than 30 percent at the end of July. Jerome Powell has said central bankers will look at the “totality of data”, heightening the importance of this Friday’s payrolls number and of the August consumer price data which will land during the rate-setting committee’s deliberations.

And odds on cuts in 2023 keep shrinking. In yesterday’s interview with the Wall Street Journal, John Williams, the president of the New York Fed, said benchmark interest rates would likely have to rise above 3.5 percent and stay at those levels through next year as policymakers try to ensure a sustained drop in inflation. Other officials are likely to echo these views on the weeks ahead, even if the central bank’s reaction function remains terribly difficult to forecast.

Euro area inflation set new records, making an extra-large interest rate hike at next week’s European Central Bank meeting more likely. Consumer prices surged 9.1 percent year-over-year and core inflation jumped 4.3 percent in August, outpacing economist estimates as economy-wide pressures increased. Market-implied probabilities on a 75 basis point move are above 60 percent, but the euro is back below parity and European yields are lower across the curve as investors position for weaker growth.

ADP’s new private-sector employment report, out at 8:15, is expected to show employers adding 300,000 jobs in August. The payroll company is using a new methodology after the old approach proved unable to anticipate changes in the Bureau of Labor Statistics’ non-farm payrolls report – but markets may prove reluctant to trade on the new approach until a few months of weekly data are in.

Data out at 8:30 is expected to show the Canadian economy losing momentum through the summer. Estimates suggest gross domestic product expanded at a very-respectable 4.5 percent annualized pace in the second quarter after growing at a 3.1 percent rate in the first three months of the year – but the national statistics agency is also likely to confirm its early 0.1-percent estimate for June, with preliminary numbers for July coming in at similar levels.

Crude prices continue to slip, with reports suggesting OPEC+ sees the global oil surplus growing in coming months. According to data cited by Reuters, the cartel’s Joint Technical Committee expects markets to be oversupplied to the tune of 3.1 million barrels per day in September, 0.6 million barrels in October, and 1.4 in November as high prices weigh on demand. Brent, the global oil benchmark is down 3.4 percent, and West Texas Intermediate is knocking on the $89 per-barrel mark, with further volatility likely around this morning’s weekly inventory data from the Energy Information Administration.

Karl Schamotta, Chief Market Strategist