Traders Await US Jobs Data

Markets remained nervous yesterday before today’s Non-Farm payroll measure of the US jobs market. GBP fell through the 1.20 level against the euro for the first time in 5 weeks while Jean-Claude Trichet was bold enough to raise growth predictions in the Eurozone.

The dollar was flighty and traded within predetermined ranges as traders waited for today’s jobs whopper. Against the pound it was strong to 1.5330/50; the area that it has come up against resistance to any moves lower in its past few sessions but a good payrolls figure could be the tonic to boost it through. Economic data that we use as guide (ADP, IJC) has been mixed with ADP data on Wednesday poor and yesterday’s initial jobless claims a slice better than expected. We do think that we will see over 100k jobs lost in the past month and the unemployment rate to rise to 9.6% however.

Sterling has seen its recent data series’ turn sour with construction PMI the latest area to do so. While the figure stayed above 50 (52.1 to be exact) and expansion has been seen, it is a slowing rate of expansion. Given that the little 0.1% extra we received on UK 2nd quarter GDP was down to over an 8% increase in construction spending and that spending is now slowing, naturally you come round to our argument that the data is likely the best we will get for a while.

In Europe yesterday it was ECB and GDP day and both bolstered the fresh-fighting single currency. GDP was as expected (1.0% on an EU-wide measure) with Germany the obvious stand out performer, growing by 2.2%. Selected others were; Spain 0.2%, Portugal 0.2%, Italy 0.4%, France 0.6% and Greece at -1.5%. Expectations are that these figures will fade as we move the second half of the year, weakening the euro. Trichet was his typical self at the post-decision press conference and he and the ECB met our expectations of offering unlimited liquidity on a 3-month term at the MLRO rate until 2011. This also helped the euro strengthen a little yesterday.

Apart from the US jobs data we have a lot of other very important news today. We start with EU and UK service PMIs at 09.00 and 09.30 respectively; both are expected to fall as consumers continue to feel the pinch. Following that is EU retail sales at 10.00, something to confirm the slowdown in the eurozone although the market is expecting a 0.2% rise. The US equivalent of the services PMI is due at 15.00 and is also expected to fall.

Today’s trade will be relatively subdued before the US jobs data at 13.30, after that we are looking for a shade of dollar weakness.

Have a great weekend.

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