3 December, 2015
FX News Today.
The U.S. ADP employment data came in better than expected, we also saw an uptick in Q3 productivity and unit labor costs; the data gave some support for the USD on Wednesday. The U.S. Fed chair Yellen appeared to put in place the foundations for a December rate within the next two weeks hike during her speech yesterday. For the time being, the market will remain “data-dependent” with all eyes now on the jobs report due out tomorrow. Unless the jobs report is a complete disappointment, markets will continue to adjust for a rate hike.
European markets will focus on today’s ECB decision, analyst projections call for a cut in the deposit rate of at least 20 basis points, maybe even larger if there are sizeable exemptions and a widening of the pool of eligible assets under the QE program.
The EUR is under selling pressure against the USD ahead of the ECB’s policy decision; EURUSD short sellers may have been profiting-taking yesterday, however, the downtrend continues today after a short lived rebound attempt yesterday after the pair hit a new multi-month low.
Main Macro Events Today
• EUR Final EMU Services PMI: revised down to 54.2 from 54.6 reported previously but still up from 54.1 in October. The composite reading was also revised down to 54.2, but remained up from 53.9 in the previous month. So economic expansion still accelerated in November and all major Eurozone countries are reporting growth, although November readings were mixed, with the Spanish PMI coming in higher than expected at 56.7, up from 55.9 in the previous month. The Italian reading meanwhile was unchanged at 53.4, while the final French number was revised down to 51.0 from 51.3 and the German reading was confirmed at 55.6.
• EUR ECB Interest Rate Decision: a cut in the -0.2% deposit rate plus a tweak in the QE program is likely. The widening of pool of assets under QE would give Draghi more room to manoeuvre in the future and add weight to his promise to do everything needed to bring inflation back towards the 2% mark.
• GBP Services PMI: The U.K. has the Services PMI for November, which we expect to bounce back to 55.5 (median 55.0) from the 54.9 reading in October.
• USD Unemployment Claims: U.S. initial jobless claims are expected to be 269k (median 271k) in the week-ended November 28. Continuing claims are expected to rise to 2,244k for the week-ended November 21.
• USD ISM Non-Manufacturing PMI: The U.S. ISM-NMI is expected to fall to 57.5 from 59.1 in October. The July spike to 60.3 set a new post-recession high.
• USD Fed’s Yellen Testifies.
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