• USD: Higher, ADP employment beats expectations fueling recovery hope, non-manufacturing ISM rises
    • JPY: Lower, pressured by improving risk sentiment and selling in cross trade
    • EUR: Lower, EU commission endorses Greek debt proposals, services PMI revised higher, retail sales flat
    • GBP: Lower, UK consumer confidence improves, services PMI posts an unexpected decline
    • CAD and AUD: AUD & CAD lower, Australia trade deficit improves, China's mortgage rates rise

      Overview

      USD traded mixed to firm Wednesday supported by report of above expectation January ADP employment report. EUR initially traded higher supported by report that the EU has endorsed the Greek proposal to reduce its deficit. EUR was also supported by report of stronger than expected EU January services PMI. GBP traded mixed with early support from report of a jump in UK consumer confidence. GBP gains were limited by report of an unexpected decline in UK services PMI. Commodity currencies were mixed with AUD posting a modest improvement in overseas as Australia reports improvement in its trade balance. CAD drifted lower despite report that economists have upgraded Canada's 2010 GDP forecast with selling attributed to a modest setback in crude and the price of gold. A report that some Chinese banks have hiked mortgage rates dampens demand for commodities. JPY weakened in reaction to improving risk sentiment and selling in cross trade. US economic data was mixed. The challenger job survey said job cuts increased for the first time since July with January layoffs 59% higher than December of 2009. The surge in layoffs is due to downsizing in retail and telecommunications. The ADP employment report for January shows that employment dropped slightly less than  expected and the decline in December was also revised lower. The ADP report suggests that US January nonfarm payrolls will turn positive. The USD edged higher after the release of the ADP report. Non-manufacturing ISM for January came in higher but slightly below market expectation. The non-manufacturing ISM index came in above 50 which suggests the service sector of the US economy is entering an expansion phase. USD consolidated its ADP gains after the non-manufacturing ISM release. FX markets remain range bound.

      Focus turns to central bank policy meetings in Europe Thursday and Friday’s US January unemployment report. The ECB is expected to remain on hold and continue to outline exit strategies and the BOE is expected to remain on hold as well with the possibility of announcing a pause in its asset purchase program. USD headline unemployment is expected to post a 0.1% rise to 10.1% and nonfarm may turn slightly positive.

      Today’s US data:

      ADP January employment declined by 22k, a reading of -30k was expected. January ISM non-manufacturing came in at 50.5, a reading of 51 was expected.

      Upcoming US data:

      On February 4th initial jobless claims for week ending 01/30 will be released expected at 465k compared to 470k last month. Q4 labor productivity, unit labor costs and December factory orders also be released on February 4th. Q4 productivity is expected at 5% compared to 8.1% last quarter, unit labor costs are expected at -2% compared to -2.5% last quarter and factor orders are expected to rise by 0.8% compared to 1.1% last quarter. On February 5th January unemployment rate and nonfarm payrolls will be released. The unemployment rate is expected to rise by 0.1% to 10.1% and nonfarm payrolls expected at -5k compared to -85k last month. December consumer credit will also be released on February 5th expected at -8bln compared to -17.5bln last month.