ADP Nonfarm Employment, Service Sector PMI, and the FED Put the Dollar in the Spotlight

Earlier in the Day:

It was a busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in focus early in the Asian session, with economic data from China also drawing attention.

On the monetary policy front, the RBNZ released its Financial Stability Report ahead of the market open.

For the Kiwi Dollar

Following the RBNZ’s latest rate hike, there was plenty of interest in this morning’s report.

Salient points from the report snapshot included:

• Ongoing challenges from COVID-19 are affecting many businesses and making the future hard to plan.
• Stretched house prices and climate change also present risks to financial stability.
• Banks’ capital levels have risen, however, making them more resilient to potential losses stemming from any economic downturn.

On the economic data front, employment figures were in focus.

In the 3^rd quarter, employment increased by 2.0%, quarter-on-quarter, following a 1.0% rise in the previous quarter. Economists had forecast a 0.4% rise.

As a result, the unemployment rate fell from 4.0% to 3.4%. Economists had forecast an unemployment rate of 3.9%.

According to NZ Stats,

• Unemployment and underutilization fell to near record lows, with employment at an all-time high.
• In the 3^rd quarter, the underutilization rate fell from 10.5% to 9.2%, while the employment rate rose to 68.8%.
• Wages were also on the rise, with the LCI salary and wages rates rising by 2.4% year-on-year.

The Kiwi Dollar moved from $0.71045 to $0.71253 upon release of the numbers. At the time of writing, the Kiwi Dollar was up by 0.17% to $0.7123.

For the Aussie Dollar

Building approvals fell by 4.30% in September, partially reversing a 7.6% jump from August.

According to the ABS,

• Private sector house approvals tumbled by 16.0%, weighing on the headline figure.
• Excluding houses, private sector dwellings surged by 18.1%.
• In spite of the September decline in building approvals, the series remains 18.2% higher than the pre-pandemic level in Sept-2019.

The Aussie Dollar moved from $0.74288 to $0.74321 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.09% to $0.7436.

From China

The services sector was back in focus following disappointing NBS Non-Manufacturing PMI numbers from the weekend.

According to the Markit survey, the Caixin Services PMI rose from 53.4 to 53.8 in October.

• Both business activity and new work expanded at a solid pace at the start of the 4^th
• Employment at services companies rose for a 2^nd month in a row.
• Input prices rose at the fastest rate since July, however, leading to a further pickup in output charge inflation.

The Aussie Dollar moved from $0.74383 to $0.74334 upon release of the figures.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.04% to ¥113.910 against the U.S Dollar.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic calendar. Eurozone unemployment figures for September are due out later today.

Barring an unexpected rise in the unemployment rate, however, we don’t expect much impact on the EUR.

The focus on the day will be on the FED monetary policy decision scheduled after the European close.

At the time of writing, the EUR was up by 0.01% to $1.1580.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. Finalized services and composite PMIs for October are due out later today. Expect any revisions to the services PMI to influence ahead of Thursday’s BoE policy decision.

At the time of writing, the Pound was up by 0.09% to $1.3624.

Across the Pond

It’s a big day ahead.

On the economic data front, ADP Nonfarm Employment Change and ISM Non-Manufacturing PMI figures will be the key stats.

The FED is also in action, however, which will be the main Dollar event of the week. With the markets expecting tapering and little else, any hawkish sentiment on rates would drive the Greenback.

Weaker than expected 3^rd quarter GDP numbers had suggested that the FED may need to tread carefully on the policy front.

At the time of writing, the U.S Dollar Spot Index was up by 0.02% to 94.113.

For the Loonie

It’s a particularly quiet day ahead, with no material stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment and crude oil inventories on the day.

At the time of writing, the Loonie was down by 0.04% to C$1.2416 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.