The Big Picture The US dollar was stronger against all the major currencies after the ECB’s decision to keep its monetary policy unchanged, leaving key policy rates at their historical lows. The dollar continued to gain throughout the day after the dovish comments by Mario Draghi. In terms of market reaction, the euro fell immediately just after the ECB conference started, breaking below the 1.3150 level against the dollar within one hour falling almost 120 pips during the US session. Moving north, the bank of England has been influenced by Governor Mark Carney policy to keep their interest rates in low levels amid strengthening economic recovery, thus the BoE kept their bond-buying program and interest rates unchanged. The GBP rose significantly against the EUR during the BoE announcement and extended its gains during the ECB press conference recording a fresh low at 0.8407 EUR/GBP. Certainly, the biggest figure of the month is the US non-farm payrolls for August. The market is expecting an increase in the payrolls with survey showing 180k vs 161k the previous month. The unemployment rate is expected to remain unchanged at 7.4%. Yesterday’s US jobs data was encouraging; the ADP employment change for August was a modest +176k but initial jobless claims continued to move lower and the employment component of the non-manufacturing ISM index was extremely strong. A better-than-expected non-farm payrolls figure will likely put the Fed on track to begin tapering off its bond purchases in September, as expected, which would probably send the dollar still higher. At this point even a disappointing report might result in just a smaller degree of tapering, say USD 10bn a month instead of the USD 20bn or so that is expected. That could be neutral or even bearish for the dollar. Having as a ‘main course’ today the US non-farm payrolls, we doubt if the rest of the economic indicators will have much impact on the today market as we expect the NFP report to drive the market. In today’s economic calendar, we have the German Trade balance and the current account for July. UK consumer inflations expectations and consumer confidence expectations for August. Also, UK will release figures on industrial production and on manufacturing production for July. Finally, Canada will release data on unemployment rate for August which is expected to remain unchanged at 7.2%. In the G20 meeting, U.S President Barack Obama came under pressure from Russia’s President Vladimir Putin and other world leaders as a possible US military strike against Syria could push the price of oil up and hurt the world economy.
Posted on: Sun, 08 Sep 2013 00:14:29 +0000
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