Will bullish Non-Farm Payrolls force the Fed’s hand?

Yesterday’s markets

2nd September 2016

  • EUR Spanish Manufacturing PMI: 51.0
  • GBP Manufacturing PMI: 53.3
  • USD Unemployment Claims: 263K
  • USD Revised Non-Farm Productivity q/q: -0.6%
  • USD ISM Manufacturing PMI: 49.4

The Dollar rally took a breather yesterday, after a four-day winning streak sparked by Fed Chair, Janet Yellen and Vice Chair, Stanley Fischer’s hawkish comments. Fischer said that today’s Non-Farm Pay Rolls reading will be a key determining factor for nearer-term policy decisions, perhaps alluding to a September rate hike. Non-Farm Pay Rolls are forecast at 186k, south of the healthy 200k mark. ADP posted a slightly better than expected 177k figure, hinting that today’s reading may exceed the consensus. 

Sterling was given a substantial boost yesterday as a bullish Manufacturing PMI figure was released. The UK Manufacturing reading surprised the markets by registering at 53.3 against an expected 49.1. This is its best reading since November 2015 and its first figure signalling expansion in three months. The Pound surged as much as 1% following the release. The uptick in orders could be a result of the weak Pound, which has increased the appetite for goods from overseas buyers.

Today’s markets

1st September 2016

  • EUR Spanish Unemployment Change
  • GBP Construction PMI
  • USD Average Hourly Earnings m/m
  • USD Non-Farm Employment Change
  • USD Unemployment Rate
  • USD Trade Balance
  • USD Factory Orders m/m

Today’s docket is jam packed. In the morning the UK Construction PMI reading will be released, which is forecast to continue contracting at a pace of 46.6. In the afternoon, the US will release a raft of high tier US labour data. The unemployment rate is expected to drop slightly to 4.8%, then the Average Earnings data is expected to follow suit with a decline of 0.1%. Finally, the Non-Farm Pay Rolls figure is predicted at 186k.