Will NonFarms fall flat?
The Pound had another bumpy ride yesterday as the markets reacted to media reports surrounding Brexit negotiations, and although trading ranges were narrower it highlights the market participants are still twitchy. It now appears that the “Chequers Deal” is dead in the water and many Conservative Party MPs were demanding that Theresa May advocates a Canadian-style free-trade deal rather than make further concessions.
The National Institute of Economic and Social Research estimated that UK is on track for GDP growth of 0.5% in Q3, although this had little currency impact. Fragile risk conditions and a dip in oil prices limited Sterling sentiment. The Pound was supported above 1.2900 against the Dollar but constrained by resistance above 1.2950 and the Euro hovered around 1.1110.
The US ADP jobs data fell comfortably short of the 190,000 expected with a 163,000 increase in August, accompanied by a small downward revision to July’s data. The Euro briefly moved back above 1.1650 against the Dollar after the ADP data before retreating again as relatively narrow ranges prevailed. US Initial Jobless Claims fell to 203,000. The ISM non-manufacturing index strengthened to 58.5 for August from 55.7 previously and above expectations of 57.0. Overall, it was a positive data day for the US indicating near-term economic strength.
The US NonFarm payrolls will be watched closely today, but as a September Fed rate hike has already been priced in, the report would need to be convincingly out of line with forecasts to move the Dollar by much. However, it is worth keeping in mind the trend of August figures coming in short before being revised up later.
The Italian government’s budget proposal dominated the trading session due to less concerns over the deficit which gave support to the Euro. Narrowing yield spreads combined with a continued decline in Italian bond yields contributed to the Euro remaining above 1.1600 versus the dollar for the session.
Data yesterday was quiet, with the big news being mixed labor market report from the US which provided a slight boost to the Eurodollar. The economic calendar today includes an Industrial Production report from Germany, some housing data out of the UK, retail sales from Italy and the biggest news for the Euro today GDP figures from the ECB at 10 am.
The Euro has lost a little ground this morning against the Dollar and Sterling due to weaker than expected industrial data from Germany (as mentioned above).
Data to watch
06:45 CHF Unemployment Rate s.a (MoM) (Aug)
07:00 GER Industrial Production n.s.a. w.d.a. (YoY) (Jul)
07:00 GER Trade Balance s.a. (Jul)
10:00 EUR Gross Domestic Product s.a. (YoY) (Q2)
10:00 EUR Gross Domestic Product s.a. (QoQ) (Q2)
13:30 USD Average Hourly Earnings (YoY) (Aug)
13:30 USD Nonfarm Payrolls (Aug)
13:30 USD Labor Force Participation Rate (Aug)
13:30 USD Average Hourly Earnings (MoM) (Aug)
13:30 USD Unemployment Rate (Aug)