Markets now await ECB

Yesterday’s markets

3rd September 2015

  • Spanish Unemployment Change: 21.7K
  • UK Construction PMI: 57.3
  • US ADP Non-Farm Employment Change: 190K
  • US Factory Orders m/m: 0.4%
  • US Crude Oil Inventories: 4.7M
  • AUD Retail Sales m/m: -0.1%
  • AUD Trade Balance: -2.46B

Yesterday in terms of data it was fairly quiet with the ADP employment report which gave the market an early indication of how Friday’s US employment number could look. The ADP report showed solid job growth, up from last month although slightly below expectations. However, due to the below forecast number there is every chance Friday's report could be a disappointment because of seasonal adjustments in the numbers. Friday’s number will be keenly watched given the US interest rate expectations. Due to the current turmoil in the financial markets (largely lead by China) it is likely that the FOMC will abandon any plans to raise rates this month. If the market settles there is an outside chance that “lift off” could happen in October.

Overnight, the Federal Reserve released the Beige Book which  provides anecdotal evidence supplied by the 12 Federal Reserve banks regarding local economic conditions in their district. It reported that there are growing wage pressures in the US economy caused by labour market tightening.  This heightened pressure on wages could lead to a pickup in consumer spending and as such increasing demand for more jobs.  There was also caution aired over the concerns of the recent China fallout, with concerns that China’s economy may be much weaker than expected, raising doubts that the Fed would raise rates as early as September.

Today’s markets

2nd September 2015

  • UK Services PMI
  • EUR Minimum Bid Rate
  • CAD Trade Balance
  • ECB Press Conference
  • US Trade Balance
  • US Unemployment Claims
  • US ISM Non-Manufacturing PMI

Looking to the day ahead  we have some high-tier data from the U.K. in the form of the Services PMI. The service sector in the UK is the dominate sector and accounts for close to 80% of economic activity. Meanwhile, across the pond, we will see the release of unemployment claims and ISM Non-Manufacturing PMI. However, the big event risk of the day comes from the Eurozone.  The head of the ECB Mario Draghi is speaking at a conference about QE and the bank rate.  Depending on Mr Draghi’s comments this could bolster the Euro or likewise weaken it. His comments will be keenly monitored given the current backdrop.