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NonFarm payrolls and the break for 1.3 plus

NonFarm payrolls and the break for 1.3 plus

GBP
Sterling inched up in a quiet day of trading yesterday against the Greenback. A run of weaker British economic data fails to deter investors from bets that the Bank of England will hike interest rates in the coming months. Surveys of purchasing managers pointing to a cooling economy have put some pressure on the pound this week, but it is still less than a cent away from nine-month highs against the Dollar in May.

That resilience seems to be mainly due to expectations of monetary tightening from the BoE – with some investors betting on a rate hike as soon as next month after a number of policy makers have spoken out in favour of one. By late afternoon trade in London, sterling was up 0.3% against the US Dollar and lost 0.2 % to a strengthening Euro following a round of weaker-than-expected U.S. labour market data that pulled the Dollar lower.

USD

US ADP employment data fell short of expectations at 158,000 for June and May’s figure was revised down by 23,000 to 230,000. The US ISM non-manufacturing index rose to 57.4 from 56.9 in May, contrary to expectations of a small decline for the month, and the orders component remained strong, although upward pressure on prices was limited.

After June’s FOMC meeting minutes left Dollar Bulls flat, markets need more conviction over the Fed moving forward with raising US interest rates and unwinding its balance sheet. Eco data showing that this period of low inflation in the States is ‘transitory’ will excite the Bulls again.

Today’s NonFarm Payrolls will be examined closely to ascertain whether the downturn in job creation will continue. Positive results will be a shot in the arm for Dollar Bulls.

EUR

Minutes from June’s ECB meeting revealed the Central Bank had considered dropping the promise to step up asset purchases if necessary. The underlying tone reiterated extreme caution in making policy changes, especially given fears over a tightening of financial conditions. Expectations of eventual policy normalisation continued to provide net Euro support. The Euro also benefited from upward pressure on Eurozone bond yields yesterday with German 10-year bond yields peaking above 0.50% for the first time in 17 months.

Bundesbank head Weidmann later stated that there was scope to start policy normalisation as the economy improved with no further need for emergency measures.

Data To Watch 
All day USD Trump-Putin Meeting
12:30pm USD Non Farm Payrolls (Jun), Average Weekly Hours (Jun), GBP BOE’s Governor Carney Speech, 
03:00pm Fed Monetary Policy (Report)

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