Most currencies take a breather beforehand


MAJOR HEADLINES – PREVIOUS SESSION

  • US Q2 Final Non-farm Productivity out at -1.8% vs. -1.9% expected and -0.9% prior

  • US Initial Jobless Claims out at 472k vs. 475k expected and revised 478k prior

  • US Continuing Jobless Claims out at 4456k vs. 4450k expected and revised 4479k prior

  • US Jul. Factory Orders out at +0.1% m/m vs. 0.2% expected and revised -0.6% prior

  • US Jul. Pending Home sales out at +5.2% m/m, -20.1% y/y vs. -1.0% expected and revised -2.8%/-20.3% prior resp.

  • AU Aug. AiG Performance of Service Index out at 47.5 vs. 46.6 prior

  • JP Q2 Capital Spending out at -1.7% vs. -6.5% expected and -11.5% prior

  • China Aug. Non-Manufacturing PMI out at 60.1, unchanged from prior

  • China Aug. HSBC Non-Manufacturing PMI out at 57.6 vs. 56.3 prior

  • HK Aug. PMI out at 52.3 vs. 51.3 prior


THEMES TO WATCH – UPCOMING SESSION

(All Times GMT)

  • Norway Unemployment (0700)

  • Swiss CPI (0715)

  • GE PMI Services (0755)

  • EU Euro-zone PMI Services/Composite (0800)

  • UK PMI Services (0830)

  • EU Euro-zone Retail Sales (0900)

  • EU ECB’s Gonzalez-Paramo to speak (1200)

  • US Change in Non-farm Payrolls (1230)

  • US Unemployment Rate (1230)

  • US ISM Non-manufacturing (1400)

Market Comments:

Currencies were contained within ranges overnight despite some more positive news on the US data front.
Pending home sales grabbed the headlines with a much better-than-expected outcome, up 5.2% m/m vs. -1.0% expected, while the weekly initial jobless claims came a close second with a 472k report, lower than the upwardly revised 478k last week and below consensus of 475k.

On the European front, the ECB left rates unchanged as expected and Trichet’s press conference held nothing new, apart from tiny shifts in comments of upside/downside risks to the economy. Notably the EUR was unable to push any higher even after ECB staff upgraded forecasts for 2011 GDP. UK disappointed with some poor house price data with the Nationwide report showed a sharp decline in August (-0.9% m/m), though still up 3.9% y/y.
evertheless, the pound succumbed to selling pressure and was an underperformer against its peers. Elsewhere, the Riksbank hiked rates by 25bp to 0.75%, as expected, and this gave the SEK some support.

Wall St responded positively to the better data, the DJIA gaining 0.49%, the S&P +0.91% and the Nasdaq +1.06%, but the response in currency markets was quite muted. This is likely due to the major release of US non-farm payroll and unemployment numbers later today and the long weekend holiday in the US.

This lethargy dragged over into Asian trading today and, with no prominent data releases scheduled, currency pairs were content to trade in tight ranges amid reduced volumes. Looking ahead to tonight’s data , market consensus is for a loss of 105k jobs, an improvement from July’s -131k, but unemployment is expected to worsen to 9.6% from 9.5%. Saxo’s view is marginally more pessimistic with a loss of 125k jobs and unemployment also at 9.6%.

Apart from the US non-farm payrolls, Europe focuses on services PMI from Germany, EU and UK along with Euro-zone retail sales. In addition to the unemployment data, the North American session has the non-manufacturing ISM data before the long Labour Day weekend.

Have a great (long) weekend.