Sunday August 30, 2015 - 12:28:24 GMT
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U.S. Jobs Data Critical To September Rate Hike Decision
John M. Bland
August Employment Report On Friday May Be Decisive For Fed
FOMC Vice Chair was decisive Friday in a TV interview when he indicated a September rate hike is still in play. He implied the strength of the August jobs data due this Friday was important and that the stability of the financial markets could play a role a well.
Monday of last week saw the equity correction that had started on the previous Friday continue. Ever since that day, markets have been in a consolidation frame of mind. One can never know when a major correction has run its course. That can only be determined with time. We saw three catalysts for the sell-off. The first trigger was the major correction in Chinese equity markets and the CNY devaluation, A second trigger was the supply induced break in Crude oil prices. A third factor was the overvaluation of equity prices fed by the the excess liquidity generated by the central bank's Quantitative Ease program. I hesitate to try to call a bottom on stocks. Only time will tell.
Forex Market Developments
Forex markets continue to be heavily influenced by activity in the equity markets. The EUR continues to play a role as the key carry trade financing currency. That means investors in risk assets (equities, commodities etc.) will borrow EUR to finance those trades. The EUR is the preferred trade financing currency because interest rates are low and the currency is vulnerable. It is expected to stay vulnerable because ECB monetary policy is seen remaining on hold for many months ahead. The currency is expected to remain weak as a result of this policy.
The upcoming week is an active period for major economic data.
-- Monday, August 30, GB- Holiday, DE- Retail Sales, EZ- flash HICP, US- Chicago PMI.
-- Tuesday September 1, AU, JP, CN- PMI's, Au- RBA Decision, DE- Employment, CH, EZ, US, CA, PMIs.
-- Wednesday September 2, AU- GDP, Trade, Retail Sales, US- ADP Jobs, Beige Book.
-- Thursday September 3, EZ- ECB Decision, US- Service PMIs, Weekly Jobless, US, CA- Trade.
-- Friday September 4, EZ- GDP, US, CA- Employment.
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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