USD gains on Fed talk – ignores poor employment data
The US Dollar is remarkably stationary this morning despite very surprising jobs data from the ADP non-farm report. Market forecasts of nearly 700,000 jobs growth were missed by a mile. The actual figure of 330,000 surprised everyone but it was perhaps a little too wide of the mark to be taken seriously. Many believe there was a glitch in the matrix that threw out an anomaly. So, rather than selling the USD, traders generally bought it. The strength in the USD wasn’t massive but GBPUSD is down below $1.39 and EURUSD is down to $1.1840 this morning. Some are citing the comments of Fed Vice Chairman Richard Clarida, who has turned uncharacteristically hawkish. That would prompt thoughts of earlier monetary tightening.
Although this afternoon brings US trade data and the official weekly jobless claims data, I suspect USD traders will want to see the July employment report on Friday before making further decisions. The caveat to that is that, if the official numbers are as poor as the ADP report, we will very likely see USD weakness.
GBP traders await BOE decision
Sterling traders will be watching the Bank of England today. Their base rate is not likely to change and their QE budget of £875 billion should stay intact but the tone and forecasts of their statement will drive the next direction of the Pound. We will also see the construction sector purchasing managers index for the UK this morning.
GBPAUD rate seems to have topped out for now. There is a lot of talk of a paradigm change between the UK and Australia, where UK interest rates could rise sooner and faster than those in Australia. That would be a reversal of a position that has lasted generations where the yield in Australia was traditionally higher than the UK and any other G7 nation. When investors are braver and start seeking yields again, rather than security alone, GBPAUD could well be on the rise.
ECB economic bulleting unlikely to shift Euro
The European Central Bank will publish their economic bulletin this morning but that is the only potential market mover for the Euro. So we expect the shared currency to be a tad muted today.
And on this day in 1948, Dutch runner Fanny Blankers-Koen won her 4th gold medal at the London Olympic games in the women’s 4 x 100m relay. She was 30 at the time, a mother of two and, it was later revealed, she was pregnant during the Olympics. I think the expression, ‘Go Girl’, was invented for Fanny Blankers-Koen.