USD awaits US employment report

Today's Highlights

Sterling steady after positive manufacturing and productivity data

USD awaits US employment report

FX Market Overview

After Wales held it together against Fiji, England's Rugby Team has a hurdle to get over when they take on the Aussies tomorrow. Every game in this tournament has been a 'must win' event but this is a definite must win for both teams if ever there was one. Good luck gents.

In the markets, the hurdle is all about restoring confidence which has clearly been rocked by the slowdown in China and the unwillingness of the US Federal Reserve to grasp the nettle and start raising interest rates. As well as share prices being depressed, manufacturing confidence has fallen and we have seen various poor consumer confidence indices as well.

This morning brings the UK construction sentiment index and that too is expected to be subdued, although the UK manufacturing PMI was better than forecast and domestic demand was pretty strong. Add to that a measure of productivity that puts the UK economy ahead of its pre-recession levels and there is every reason for the Pound to out-perform other currencies. It isn't doing that oddly enough but Sterling is looking over-sold right now, so there is scope for a recovery if next week's UK data is stronger.

Today's headline data is the US employment report. The September data ought to show employment growth the non-agricultural sectors of the US economy and that will pour more pressure on the Fed to start the normalizification (I think that's how they refer to it) of US interest rates. I suspect they will start that process in the new year with teeny-tiny adjustments but there is a chance they will take the first step in that direction with a 0.15% rate hike before the year end. We shall see. The US Dollar remains the currency du jour and will become more popular if the non-farm payroll gain is higher than 200,000 jobs. We get a speech from one of the Fed Chairmen on monetary policy later in the day, so that'll be interesting. The counterbalance to this positiveness is the US factory orders data, due at 14:00 GMT. That is expected to be very poor and, if the forecasts are proven to be right, the Dollar will be hit by that.

We heard overnight that Australian retail sales rose by 0.4% last month. That was entirely in line with forecasts and the Aussie Dollar was unmoved but traders are likely to be nervous ahead of next week's RBA interest rate decision and the inflation data later in the week. Understandably, the Australian Dollar is likely to be pretty flat until then.

In other news, my favourite quotes of the week come from Princess Michael of Kent who said, “I’m a great animal lover and I’m involved in a lot of conservation, but animals don’t have rights. They don’t have bank accounts. They don’t vote.” She added, “You only have rights if you pay your taxes.” How about if you live rent free in Kensington palace for 23 years, do you still have rights after than then? Apparently one does.