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GBP Advances; BOE Maintains Policy, Upgrades Inflation Forecasts
Summary: In subdued trade, the Dollar Index, a measure of the US currency’s value relative to a basket of foreign currencies finished little-changed at 92.26 (92.27 yesterday). Today’s Non-Farms Payrolls report will be closely watched with median estimates of Job Growth anywhere from 835,000 to 880,000 in July, from 850,000 in June. Data released last night showed that new claims for unemployment benefits declined to 385,000 from 399,000 in the week ended 31 July. The claims data has no bearing on tonight’s NFP report as it falls outside the survey period. The British Pound advanced 0.3% against the Greenback to 1.3927 (1.3887) to finish as best performing major. The Bank of England kept its monetary policy unchanged as expected and upgraded its inflation forecasts. Against the Canadian Loonie, the US Dollar eased 0.35% to 1.2498 from 1.2542 after Canada posted its largest trade surplus in almost 13 years. Higher oil shipments from the boosted exports. The Australian Dollar extended its rally to 0.7404 (0.7380), its highest close in a week. Against the Japanese Yen, the Greenback settled at 109.74 from 109.47 yesterday, up 0.20%. A bounce in the US 10-year bond yield boosted the Greenback against the Japanese currency. The Euro closed flat at 1.1835 in another featureless and dull trading session. Against the Asian and Emerging Market currencies, the Greenback was mixed. The USD/SGD pair settled at 1.3510 (1.3512) while USD/THB was up 0.35% to 33.25 from 33.12 yesterday. China’s Offshore Yuan ended flat against the Greenback (USD/CNH 6.4615).
Treasury Bond yields were mostly higher. The benchmark 10-year US bond rate rose 4 basis points to 1.22%. Germany’s 10-year Bund yield was unchanged at -0.50%. Canada’s 10-year treasury yield was last at 1.17%, unchanged from yesterday.
Wall Street stocks rallied on solid earnings which outweighed Delta virus concerns. The DOW gained 0.6% to 35,053 (34,820 yesterday) while the S&P 500 settled at 4,427 (4,404).
Data released yesterday saw Australia’s Trade Surplus in June at +AUD 10.50 billion from May’s downward adjusted Surplus at +AUD 9.27 billion (from +AUD 9.681 billion). Germany’s June Factory Orders climbed 4.1% in June, beating forecasts at 2.1% and a previous -3.2%. UK July Construction PMI eased to 58.7 from 66.3, missing estimates at 64.0. The US Trade Deficit rose to -USD 75.7 billion in June from May’s deficit of -USD 71.2 billion, higher than expectations of -USD 74.2 billion. Canada’s Trade Surplus in June climbed to +CAD 3.2 billion from May’s Deficit of -CAD 1.39 billion.
On the Lookout: Today the focus is on the US NFP report where markets will be monitoring the Employment Change. Tonight’s number has an extremely wide range of forecasts. According to a CNBC report, the range for jobs created in July is from 350,000 to 1.2 million. Most economists are looking at a gain of between 835,000 to 880,000. The Unemployment Rate, which should not be ignored is expected to drop to 5.7% from 5.9%. Forecasts for Wages in July are at 0.3%, unchanged from June.
Other data released today kick off with Australia’s AIG Services Index (no forecasts, previous was 59.8). The RBA releases its Monetary Policy Statement (11.30 am Sydney). Japan follows with its Annual Household Spending for June (f/c 0.1% from 11.6%), Japanese June Average Cash Earnings (f/c 1.0% from previous 1.9%), and Japan’s June Leading Indicators (f/c 104.2% from 102.6%). Germany starts off Europe with its June Industrial Production (f/c 0.6% from -0.3%). France is next with French Q2 Private Payrolls (f/c 0.6% from an upwardly revised previous 0.5% from 0.3%). The UK releases its Halifax House Price Index for July (m/m f/c 0.4% from -0.5%). North American data kick off with Canada’s July Employment Change (f/c 148,500 from 230,700) and Canadian Unemployment Rate (f/c 7.4% from 7.8%). The US rounds up the day’s report with its July Non-Farms Payrolls Change (f/c 835,000 to 880,000 from previous 850,000), US Unemployment Rate (f/c 5.7% from 5.9%), Average Hourly Earnings (Wages) – (f/c 0.3% from 0.3%). Canada releases its July IVEY PMI (f/c 67.3 from 71.9). US June Consumer Credit (f/c USD23.2 billion from USD35.3 billion).
Trading Perspective: Welcome to Payrolls Friday! That big monthly event where markets can turn into a lottery, particularly when economists’ expectations are all over the shop. Today is one of those days. The best preparation is to be flexible and nimble, keep your levels firm in your head, and do not be shy to pull the trigger. For a trader, preparation is what its all about. Form your scenarios and your levels from the market expectations and price action.
Ahead of tonight’s report, expect consolidation within recent ranges which were established in the past 24 hours. The Dollar finished little-changed and is poised to make a move.
If the US Payrolls report disappoints, say with a gain of less than 800,000 jobs, the USD could tank. It would take a number close to 900,000 to get the Greenback’s topside excited.
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