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Mixed US data confuses markets ahead of all important NFP

  • GBP Services PMI: 55.5
  • USD ADP Non-Farm Employment Change: 257K
  • CAD Trade Balance: -2.0B
  • USD Trade Balance: -42.4B
  • USD ISM Non-Manufacturing PMI: 55.3
  • USD Factory Orders m/m: -0.2%
  • USD Crude Oil Inventories: -5.1M
  • FOMC Meeting Minutes
  • AUD Building Approvals m/m: -12.7%
  • AUD Trade Balance: -2.91B

Yesterday we had the release of three pieces of key high tier data to and from the pond. In the morning the UK released its third and final PMI data this week in the form of Services PMI. The service sector accounts for nearly 80% of UK GDP so the market impact is considerably heavier than manufacturing and construction PMI. Services PMI posted a slightly worse than expected 55.5, however above 50 and therefore continuing to expand in the UK’s largest sector.

Across the pond, the US released their ADP non-farm employment change and ISM non-manufacturing PMI. We gained an early indication of how Friday’s job numbers could look with the release of the ADP employment report. ADP posted a very bullish 257k against a forecast 193k, which would make it the highest reading since July 2014. Shortly after, ISM non-manufacturing missed expectations of 56.0, registering a 55.3, sparking a slight burst of Dollar selling late yesterday afternoon.

After the European markets closed the FOMC released their meeting minutes from December. Whilst these were highly anticipated, there was not much surprise given December's policy meeting. Policy makers voted unanimously that the U.S. economy was ready for a rate hike in December but opinions are still varied as to the trajectory of further increases as inflation remains a concern. In light of this, we saw the US Dollar weaken slightly as the probability of four interest rate hike this year declined, especially as commodities continue their slide with oil trading at its lowest levels since 2003.

  • German Factory Orders m/m
  • German Retail Sales m/m
  • GBP Halifax HPI m/m
  • EUR Unemployment Rate
  • USD Unemployment Claims
  • AUD Retail Sales m/m

 

The market is likely to take its time to decipher the minutes from the previous evening to try and ascertain when the next increase in rates will be scheduled for in 2016. Meanwhile, data is fairly second tier with the focus on the Eurozone. German retail sales and Eurozone unemployment are set for release as is the weekly US jobless claims.