20:00 GMT (Global-View.com) Sep 1, 2010 The ADP private employment estimate released Wednesday was weaker than suggested and had negative implications for non-farm payrolls on Friday. On the other hand, markets decided to focus on a much better than expected ISM manufacturing PMI which came in at 56.3 vs 52.7 expected, and this data sent equities soaring. On the other hand, the first day of the month is often a time when equity managers have new funds to deploy. The equity to forex correlation Wednesday did not work terribly well. Key Weekly Jobless Claims data are due on Thursday.
Japanese kingmaker Ozawa, seen likely to replace PM Kan in his party's mid-September meeting, warned about JPY intervention if the currency remains too strong. Japan's problem is economic growth and a declining population. We doubt a change in Japanese political leadership would have much of an impact on the economy. Japan needs fundamental structural changes to be made. Most leaders in Japan have hit a stone wall when they have tried to make structural changes. Some feel the BOJ will likely become very serious about capping the USDJPY pair if the 80.00 level is approached. 10-yr JGBs are weaker.
UPCOMING DATA HIGHLIGHTS: The Far East will see Australian trade data on Thursday. In Europe , Swiss GDP and Retail Sales data are awaited. The EZ will announce GDP and PPI figures. Also the ECB will hold its monthly meeting. No policy changes are expected. In North America , weekly jobless claims, pending homes sales and factory orders are slated.Weekly EIA natural gas inventory data are due.
The EURUSD is up on the day and the GBPUSD is higher. The EURGBP cross is up. Traders are still watching the European sovereign debt situation.
In the GBP, markets are keeping an eye on the U.K. economy.
The USDCHF is steady and EURCHF is up. The SNB strong stand in supporting the EUR against the CHF has waned after massive FX losses. Flows out of the EUR into the CHF remain an issue for the SNB.
The USDJPY is steady and the EURJPY cross is up. While Japanese public finances are a mess, analysts point out that most JGBs are owned by Japanese, so Japan is not dependent on foreign investment. The government has been pressed the BOJ to promote growth and favors a lower exchange rate.
Some traders focus intently on the Japan vs. U.S. 2-yr note spread (only the U.S. 2-yr moves much).
The risk trade continues to be turned on and off almost daily. As for the commodity currencies (CAD, AUD and NZD), they are higher vs. the USD. The Bank of Canada recently has been sending mixed policy signals. A strong CAD eases the pressure on the Bank of Canada to tighten. In Australia, the RBA is unlikely to tighten in September. Election results were inconclusive. The RBNZ is now in a reduced tightening mode. Oil and gold are up. Gold is still favored as a refuge from paper money.
EQUITIES & INTEREST RATES
Equities and Bonds are also risk trades. Far East equities closed mixed. European bourses are up. U.S. equities are higher. The U.S. 10-yr was last 2.51%, +3 bps.
Bonds are a counter to risk trades because risk investments must be financed. When the cost of money moves up (higher interest rates), the return and allure of risk trades such as equities falls.
See ECONOMIC CALENDAR for a complete list of future forex market events and consensus data estimates. Go to the forex forum for up-to-date market developments and technical trading ideas.
John M. Bland is an author and co-founder and partner of Global-View.com. Prior to Global-View.com, he was a forex trader and a private-label forex analyst for a top Fed watching service in NYC. He has been a corporate forex advisor and also worked in international liability management for a major N.Y. money center bank. John holds an MBA from the University of California at Berkeley and a B.A. in International Economics from that school.
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Tue 31 July 2018 AA JP- Bank of Japan A 06:00 DE- Retail Sales A 09:00 EZ- flash HICP/GDP AA 12:30 US- Core PCE Deflator A 14:00 US- CB Consumer Confidence Wed 1 Aug 2018 A Final Mfg PMIs AA 12:15 US- ADP Private Payrolls A 15:00 US- EIA Crude AA 18:00 US- Federal Reserve Decision Thu 2 Aug 2018 AA 11:00 GB- Bank of England Decision A 13:30 US- Weekly Jobless Fri 3 Aug 2018 A Final Services PMIs AA 12:30 US- Employment A 12:30 US/CA- Trade
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