The payrolls merry-go-round

5 August, 2016

The payrolls merry-go-round

So this time around, we have two Employment Reports before the next Fed meeting, so if this one is bad, the bulls will be able to cling onto the hope of a rebound early September and vice versa. We’ve had something of a merry-go-round in the past few weeks, which has not been dis-similar to the same period 12 months ago. In other words, a bit of a “will they, won’t they” approach to every day release, but not quite as intense as last year, given that the first rate hike is already in the bag and the data is not as compelling for a move this year. As such, the market is currently putting less than 20% probability of a tightening at the September meeting. With regards to today’s numbers, the market is looking for a more modest 180k rise in headline payrolls, after the strong 287k re-bound we saw last month. The main issue will be whether the labour market is reflecting the general slower pace of growth in the economy in the second quarter. If it does, then it’s harder for the Fed to argue the economy is seeing a temporary slowdown.

Looking beyond the Fed, the volatility yesterday was naturally on sterling after the Bank of England followed the ECB and BoJ by throwing various policy options at the issue of a slowing economy and deflation risks to see which one would stick. So we have a cut in rates, more QE, a new lending program and a degree of forward guidance. Naturally, the question is to what extent these will impact the real economy. We’ll have to wait some time to see what the real story is there, but in the meantime, the bias on cable is likely to be lower, as we’re seeing modest policy divergence between the two and that tends to be a strong driver of a currency pair. Elsewhere, the Aussie continues to power ahead, with AUDUSD pushing towards the July high of 0.7676. The latest indications from the RBA suggest that it is in no hurry to lower interest rates, hence the fresh push higher overnight.


Source link  
German & New Zealand Elections

The results of the German Election have re-elected Chancellor Angela Merkel for a fourth term. Her CDU party won fewer votes than was expected and Chancellor Merkel...

Fed Holds Rates for Now But...

Unsurprisingly, the Federal Reserve kept rates on hold following the end of its 2-day meeting on Wednesday. They did, however, indicate that...

UK Unemployment at 42 Year Low

UK unemployment fell to its lowest level since 1975, data on Wednesday revealed. Unemployment fell by 75K, bringing the unemployment...


US Equities at Record Levels

US equities closed at record levels on Wednesday, as improved risk-on sentiment returned to the markets and news that the US economy...

USD Stabilizes

Hurricane Irma has, reportedly, inflicted less damage on the US mainland than was originally predicted, thereby reducing the economic impact of the devastation it was expected to...

Markets on Edge

With the markets risk appetite dampened after North Korea’s most powerful nuclear test to date, USD and Global equities fell whilst Gold, Yen and Sovereign Bonds all rose....


Risk Appetite Returns

North Korea official news agency reported on Monday that leader Kim Jong Un will watch the actions of the United States for a while longer before making a decision to fire missiles at Guam...

US-Korean Tensions Rattle Markets

Markets were cautious on Wednesday, as safe-haven assets pushed higher after tensions grew between the US and North Korea. Markets are concerned...

Global Manufacturing Grows

Recent data releases have shown that global manufacturing saw an increase in July, further confirming global economic momentum has carried into H2...

  


Share: