All eyes on the US nonfarm payrolls data
With the Bank of England’s (BoE) monetary policy decision now in the rear-view mirror, market participants have their eyes set on the much-awaited US nonfarm payrolls data for July, scheduled to release later today. Following a robust report in June, another strong payrolls result will increase expectations of an interest rate rise by the US Federal Reserve (Fed) this year. Further, the nation’s unemployment rate is expected to edge down in July. In addition to this, investors will look forward to the US trade balance and consumer credit change data, both for the month of June.
In the UK, house prices witnessed the biggest slide since February 2016 in July, while in the Eurozone, German factory orders unexpectedly dropped in June.
Pound Sterling – UK Markets
The BoE, acting on its chief economist Andy Haldane’s wish to use “a sledgehammer to crack a nut”, delivered its first rate cut in seven years and announced measures to stimulate the economy in a bid to ward off recession following the Brexit vote. The BoE now joins the Bank of Japan and the Reserve Bank of Australia, as both introduced stimulus measures during the past week. Yesterday, the BoE slashed the key interest rate to a historic low of 0.25% and expanded its asset purchase facility by £60.0 billion. Noting that the nation’s outlook for growth in the short to medium term has weakened markedly, the central bank slashed its forecast for Britain’s economic growth and the BoE Governor, Mark Carney, warned that there was scope to cut interest rates further. The BoE's easing measures hammered the Pound, which slid below the crucial 1.32 mark against the Dollar, recording its largest one-day drop in a month.
Today, data released earlier during the session showed that UK’s Halifax house price index declined to a five-month low level in July.
US Dollar – US Markets
The US Dollar is trading lower against the single currency and the Pound this morning with investors looking forward to the major market mover i.e. US nonfarm payrolls data for July, scheduled for release later in the day. The consensus forecast is for an increase of 180.0K jobs, down from 287.0K booked in the previous month, while unemployment rate is expected to slightly fall from 4.9% to 4.8%. The data will provide indications on the strength of the US labour market and could be helpful for the Fed in deciding the timing of the next rate increase.
Yesterday, data showed that US weekly initial jobless claims unexpectedly rose last week, but remained at a level consistent with steady hiring. Additionally, US factory orders slid for a second consecutive month in June, dragged down by durable goods orders. However, the decline was not quite as steep as expected. Meanwhile, US durable goods fell in June, recording the biggest drop in almost two years, mainly due to weaker demand for civilian aircraft and defense products.
Euro – European Markets
The shared currency is trading mixed against the greenback and the Pound this morning. Data released earlier during the session showed that German factory orders surprisingly declined in June, as demand for investment goods from within the Eurozone dropped in the run-up to Britain’s referendum on European Union membership. This is the third consecutive month that factory orders have remained below investor estimates. In other economic news, French trade deficit widened in June as exports fell compared to the previous month. Further, the nation’s current account deficit also expanded in June.
Separately, Spain’s industrial output rose less than expected in June. While the production of consumer goods and capital goods increased, energy output declined. In Italy, industrial production continued to post a decline in June. Next week there is a slew of important data points scheduled for release in the Eurozone, including Germany’s industrial production, trade balance and consumer price index data, along with the Eurozone’s investor confidence and second quarter GDP data.
Other Currencies – Highlights
The Canadian Dollar has extended its previous session gains against the US Dollar this morning. Market participants look forward to several economic releases from Canada later in the session. First up is the nation’s international merchandise trade data for June, wherein the trade deficit is expected to narrow. Following closely on its heels will be Canada’s unemployment rate data for July, which is likely to edge higher. The nation’s employment change indicator, which recorded a downbeat reading in June, is expected to post a sharp turnaround in July. Further, Canada’s Ivey Purchasing Managers’ Index is expected to slightly drop in July. Additionally, the US Dollar – Canadian Dollar currency pair will be affected by the US nonfarm payrolls report, due later in the session.
Looking ahead, Canada will witness the release of a series of housing sector-related data points next week. This includes the nation’s building permits, housing starts and the New Housing Price index data.