US weaker after poor employment report

Have you seen the film ‘Trading Places’? The scenes of ‘open outcry’ trading on the concentrated orange juice market, have been consigned to the past for the last 18 months or so, while the covid pandemic stopped all that kind of closeness. The London Metals Exchange has started open outcry trading again. It means nothing to forex traders; we’ve never had an open outcry pit for that, but it is another measure of return to normality.

Large entertainment venues are planning on using covid passports as the test for entry in the autumn. That’ll create another outcry of discrimination but at least they can start to recover some lost revenue.

In the forex market, Friday’s US employment report was very disappointing. Just 235,000 fresh jobs were created in American companies in August. That was about a third of the expected number. It chimes with the disappointing ADP report earlier in the week and that caused the GBPUSD rate to shoot up to nearly $1.39 briefly. A bit of profit-taking saw that pair slip half a cent to this morning’s opening level of $1.3845.

AUD and NZD continue to gain as USD falls

The EURUSD rate was similarly volatile on Friday. $ 1.19 was seen for the briefest of moments but this pair is down to $1.1860 as I write. That U.S. dollar weakness has manifested itself in strength for the Australian and New Zealand Dollars. GBPAUD is down to AUD 1.8610 this morning; some of the lowest rates we have seen since mid-July. Also, GBPNZD has extended the downtrend it is has been in since mid-August. That pair starts Monday at NZD 1.9375.

There is more than a hint of deja vu when it comes to the sterling-euro exchange rate. This pair is still hanging around at €1.1650 and occupies a range with a high half a cent higher and a low half a cent lower. this pair could have been however we’re not for the fact that German industrial orders were up 3.4% in the month to August. That was slightly down from the previous months 4.6% but massively better than the market expectations of a 1% decline. with Germany being the powerhouse of European production, this will add some weight to the euro. The market forecasts for tomorrow’s German business sentiment index are quite negative. I wonder if that ZEW index will surprise the upside as well. Be ready for some EUR strength if so.

There isn’t a great deal of data other than that today we will see the UK construction sector PMI. That is likely to be slightly down on the previous month but still, a positive 56 or 57 reading on an index where 50 marks the difference between growth and contraction.

RBA interest rate decision tonight

Overnight tonight, the Reserve Bank of Australia will almost certainly leave their base interest rate on hold at nought point 1%. There’s been a lot of mixed messaging around the RBA, so the statement data companies their interest rate decision will be very interesting and could will shift the Aussie dollar. Any hint of early tightening of monetary policy could well strengthen the Australian dollar further and, as mentioned above that has been consistently strengthening for the last fortnight.

Central banks dominate the week.

Central bankers dominate the rest of the week, with the Bank of Canada making their announcement on Wednesday, the European Central Bank announcing their interest rate decision on Thursday adds several speeches from central bankers throughout the week. There will also be UK GDP data announced on Friday. The forecast for that data I’m very mixed so there’s plenty of scope for sterling volatility in the run-up to Friday and on Friday itself.

And on this day in 1926, Gertrude “Trudy” Ederle, became the first woman to swim the English Channel. She set off from Cap Griz-Nez in France and arrived in Dover 14 hours and 39 minutes later. That broke the previous record set by Captain Matthew Webb in 1875. All together now, brrrrrrr.

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