Locking it in
When the moderates start to change their tune then a shift in policy is coming. Atlanta Federal Reserve President, Dennis Lockhart, last night gave a big hint as to how he would vote at the upcoming September Fed meeting. In an interview with the Wall Street Journal, Lockhart said that “I think there is a high bar right now to not acting, speaking for myself,” and that “It will take a significant deterioration in the economic picture for me to be disinclined to move ahead.”
Lockhart is a bellwether for the Federal Reserve and the wind seems to be in the sails of our call for a rate rise in September. USD has acted positively as a result of these comments with EUR/USD below 1.09 for the first time in a fortnight. GBP/USD is keeping its nose clean this morning, however, nobody wants to be too short the pound as we head into tomorrow’s ‘Super Thursday’ Bank of England extravaganza.
Markets are not going to let the USD bulls get overexcited today, however. Friday’s payrolls announcement is still being seen as a referendum on a rate rise by the Federal Reserve. Some analysts seem to be happy with a jobs number north of 200,000 and as long as wage dynamics and improvements in the unemployment rate are maintained, then I am inclined to agree with them. Friday afternoon could be a very big session for the greenback. USD buyers should beware.
Kiwi not going the way of the Dodo
There were further losses for the NZD overnight as unemployment figures further worsened a picture already soured by falling milk prices. New Zealand added fewer jobs in Q2 than had been expected with a falling participation rate signalling that while people were opting to try and join the workforce, little work was available for them.
The Reserve Bank of New Zealand have got their wish of a weaker currency and barring a collapse in inflation, then I think that we have found a bottom in interest rates in the Land of the Long White Cloud. Similarly the noises from the Reserve Bank of Australia yesterday suggested that a longer-term pause in the Bank’s easing cycle may be at hand. The depreciation of the AUD may well continue in relative terms against currencies soon to be affected by tightening monetary policy (USD, GBP), but an outright attack on the currency from home-grown policy seems to be done for now.
Services, ADP and trade balance up
Monday’s manufacturing numbers were better than expected globally all told, unless you live in Greece of course, and we are expecting today’s Services estimates to also outperform. Italy’s number is due at 08.45, France at 08.50, Germany at 08.55, and the Eurozone wide measure at 09.00 with the UK number due at 09.30. The US’s ISM number will be released at 15.00 BST.
This afternoon also sees the ADP private measure of the US jobs market at 13.15 with anything above 200,000 likely to strengthen the greenback ever further.