Good morning
We had some mixed data from the US yesterday. Challenger job cuts was much worse than expected and ADP was also lower than expected, with a downward revision to the previous month as well, which sent USD lower to 1.3180, 1.1120 and 142.85 vs GBP, EUR and JPY respectively. Jobless claims were pretty much in line, while the ISM PMI came in a touch better than expected which helped cap the USD selling for a while, but this morning we’re back up at 1.3190 and 1.1120. USDJPY is down at 142.20, yen strength coming from talk that BoJ could raise rates faster than previously expected.
Eyes now fixed firmly on the nonfarms this afternoon. Last month the headline was +114k, potentially weather affected, this time the consensus is for a pretty hefty +160k but after the employment numbers this week there does appear to be a risk that the headline could come in lower and/or we see a revision lower to the previous number. I have to add though that historically none of the JOLTS, ADP or challenger have a great track record as a nonfarms indicator. For the record, there is hope that the unemployment rate ticks lower to 4.2% and that average earnings rises to 3.7%. So, the market is looking for a pretty strong set of numbers, which could make market reaction to a weaker surprise all the more exaggerated.
Feds Goolsbee gave USD no support when he said inflation is coming down and unemployment is going up faster than Fed imagined back in June, and sees multiple rate cuts over the next twelve months. This doesn’t really offer and clues for the short term decision of whether we see 25 or 50bps cut from the Fed in September but does highlight the move towards a more dovish Fed. The weaker the number today, the more chance of a 50bps cut. We have two Fed officials speaking today after the nonfarms, they are likely to be the last Fed officials we hear form before they enter the blackout period ahead of the Fed rate meeting on 18th Sept.
We do have CAD employment numbers as well this afternoon, regularly overshadowed by their North American neighbours but after the rather dovish BoC earlier in the week there is a chance this could come in worse than expected. The unemployment rate is expected to come in at 6.5% form 6.4% last month but I have seen some suggestion this could come in as high as 6.7%.
So, plenty to keep us busy, which isn’t a bad thing. I popped out yesterday afternoon just as the skies turned dark and I ended up getting drenched in a horrendous downpour. We’ve got a load more rain forecast today and over the weekend. All rather wintery, probably better if I just stay at my desk!
Some news from the nations league last night. Ronaldo, at the age of 39, scored for Portugal in their win over Croatia to put him on an incredible 900 career goals. Still performing at the top level. Not quite at the same level, but still impressive, was San Marino ending their twenty year, 140 match winless run with a win over Liechtenstein. The lad that scored hadn’t been born when San Marino last won.
Looking to the weekend, England play tomorrow evening, their first match under Lee Carsley, the interim manager after Southgate’s departure. It will be interesting to see what team he selects and how he wants the team to play. He was manager of England U21’s and by all accounts had them playing some exciting stuff.
Have a great day and a great weekend. Stay dry!
- 08.00 ECBs Elderson speaks
- 10.00 EU employment
- 13.30 US nonfarm payrolls
- 13.30 CAD unemployment
- 13.45 Feds Waller speaks
- 15.00 CAD Icey PMI
- 16.00 Feds Waller speaks
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