Financial markets are suffering a modest post-July 4 hangover, with the big risk haven currencies – the dollar, euro, and yen – outperforming their commodity-linked brethren ahead of the North American open. 

Risk appetite is broadly weaker after China’s Caixin services sector purchasing manager index fell by more than expected in May, providing more evidence of a softening in consumer sentiment in the world’s second-largest national economy. The index dropped to 53.9 from 57.1 in April, missing forecasts that were set above the 56 threshold, and aligning with similar results from the official services and manufacturing surveys last week. The yuan is modestly weaker as traders bet monetary policymakers will continue deploying easing measures, but the prospect of more broad-based stimulus – particularly after the politburo later this month – could help reverse that dynamic later in the session.

Both of the major global oil benchmarks are effectively unchanged relative to levels that prevailed ahead of Monday’s production cuts from Saudi Arabia, Russia, and Algeria. With monetary policy continuing to tighten across developed markets and the Chinese economy growing at a lacklustre pace, investors think that the voluntary output reductions – which will amount to roughly 1.52 million barrels a day in August – will fail to offset generalized demand compression in the months ahead.

Canada’s dollar – recently far more correlated with the S&P 500 than with oil prices – is modestly weaker. Odds on a rate hike at next week’s Bank of Canada meeting are holding near coin-toss levels, but evidence of softening in the employment market in Friday’s Labour Force Survey could trigger a move lower, with the loonie vulnerable to a run back through the 1.34 mark if typical July seasonality kicks in.

The Australian dollar is lower after the central bank opted to leave its cash target rate unchanged at 4.10 percent. The Reserve Bank of Australia said its pause “will provide some time to assess the impact of the increase in interest rates to date and the economic outlook”, but maintained a hawkish bias, noting that inflation remained “too high,” and likely to “remain so for some time”. Labour market pressures “lessened,” but “housing prices are rising again,” meaning that wealth effects might be contributing to excess demand in the economy. Markets expect a final hike to come between the August and October meetings, bringing the terminal rate to 4.35 percent.

Ahead today, the Census Bureau will publish final report numbers for factory shipments, inventories, and orders for the month of May. Market implications should be minimal, given that its advance estimate showed new orders for durable goods increasing 1.7 percent in the month.

At 2:00 this afternoon, minutes taken during the Federal Reserve’s June meeting might shed light on how policymakers arrived at a unanimous decision to stay on hold even they signalled at least two more hikes by year end. After the meeting, Chair Jerome Powell seemed to suggest that he wanted to review more than three months of data before making further moves – but with the dot plot showing 12 of 16 officials expecting to tighten at least twice more, there’s some mystery as to why a pause was needed. US yields – particularly front-end Treasuries – could move higher if the tone is more hawkish than anticipated.

The New York Fed’s John Williams will take part in a moderated discussion with the Central Bank Research Association at 4:00. Depending on the flow of conversation, we may get some guidance on how comfortable officials are with an ongoing easing in financial conditions that is lifting asset prices, bolstering wealth effects, and threatening to undo the central bank’s tightening efforts.