As ADP Nonfarms Roll Out, It’s All Eyes on the FED

It’s all eyes on the FED. Will they deliver a 25 bps cut or is it going to be a surprise for Trump and the majors?
Bob Mason
Arms trade business concept.

Earlier in the Day:

It was another particularly busy Asian session on the data front this morning.

The Kiwi Dollar and Aussie Dollar were in action through the early hours. With the FED interest rate decision also due out later on, there was some jostling through the session.

Outside of the economic calendar, the markets also continued to consider geopolitical risk on the day. The U.S – China trade talks, Brexit and tensions in the Middle East were in focus.

Out of China

China’s NBS private sector PMI figures kicked off proceedings. The Manufacturing PMI rose from 49.4 to 49.7 in July, which was better than a forecasted 49.6. The Non-Manufacturing PMI fell from 54.2 to 53.7 in July, which was worse than a forecasted fall to 54.0.

The Aussie Dollar moved from $0.68685 to $0.68634 upon release of the figures that preceded key stats out of Australia.

For the Kiwi Dollar

The ANZ Business Confidence Index rose from -38.1 to -44.3 in July. According to the latest ANZ Survey,

  • Firms’ views of their own activity fell by 3 points to an 11-month low +5%.
  • Inflation indicators were slightly softer while pricing intentions held steady.
  • Employment intentions fell from 0 to a net 6% of firms expecting to cut jobs, with investment intentions falling by 3 points to flat.
  • Profit expectations fell 3 points to a net 16% expecting profitability to decline.
  • A net 42% of firms expect it to be tougher to get credit, down 2 points to a record low.
  • Export intentions fell by 4 points to a net 1% of firms intending to increase exports.

The Kiwi Dollar moved from $0.66097 to $0.65961 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.09% to $0.6607.

For the Aussie Dollar

2nd quarter inflation figures and June private sector credit numbers provided the Aussie Dollar with direction early on.

According to figures released by the ABS, the annual rate of inflation picked up from 1.3% to 1.6% in the 2nd quarter, which better than forecast. Quarter-on-quarter, consumer prices rose by 0.6% in the 2nd quarter, coming in well ahead of forecast. In the 1st quarter, consumer prices had risen by 0.5%.

Private sector credit rose by 0.1% in June, following a 0.2% rise in May, according to figures released by RBA. Economists had forecasted a 0.3% increase.

The Aussie Dollar moved from $0.68622 to $0.68880 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.31% to $0.6893.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.04% to ¥108.57 against the U.S Dollar.

The Day Ahead:

For the EUR

Economic data out of the Eurozone failed to provide the EUR with support. Softer inflation figures and Spanish GDP numbers offset a jump in German retail sales figures. Adding to the downside was a marginal slowdown in the Eurozone economy.

On the geopolitical front, Trump’s latest tweets weighed on risk sentiment on Tuesday, which continued to test the majors through the morning.

The lack of any majors moves ultimately came ahead of today’s FOMC interest rate decision, where a 25 basis point cut is priced in.

At the time of writing, the EUR was down by 0.04% to $1.1150.

For the Pound

It’s another quiet day ahead, with no material stats due out of the UK to provide the Pound with direction.

The lack of stats will continue to leave Brexit in focus. There was much-needed support for the Pound through the early part of the day.

With the BoE monetary policy decision due tomorrow, we can also expect the markets to begin to consider what lies ahead…

At the time of writing, the Pound was up by 0.16% to $1.2172.

Across the Pond

It’s a big day for the Greenback. On the data front, July ADP nonfarm employment change and 2nd quarter employment cost index numbers are due out.

While we would expect the ADP numbers to be the key driver, the market focus will continue to be on the FOMC interest rate decision later in the day.

With the markets having priced in a 25 basis point cut, the focus will be on the rate statement, assuming that the FED delivers.

At the time of writing, the Dollar Spot Index was up by 0.04% to 98.087.

For the Loonie

Following a quiet start to the week, GDP numbers and June’s RMPI are due out later today. We can expect the GDP numbers to be the key driver on the day. Any weak figures and expect the Bank of Canada to join the monetary policy easing queue…

Outside of the stats, any chatter on Iran will also be a factor on the day.

The Loonie was up by 0.03% at C$1.3147, against the U.S Dollar, at the time of writing.

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