Dollar Firm Ahead Of Non-Farm Payroll

Dollar remains firm as markets are waiting for another piece of important economic data from US today. The non-farm payroll report is expected to show 185k growth in July while unemployment rate is expected to drop to 7.5%. Expectation for the NFP figure was high after a string of solid data released earlier this week. The ADP employment report showed 200k growth in the private sector and beat expectation of 180k. Initial jobless claims dropped 19k to 326k in the week ended July 27, the lowest level since January 2008 and was much better than expectation of 344k. The 4-week moving average of initial claims also improved slightly to 341.3k. The employment component of ISM manufacturing was very encouraging, which rose fro 48.7 to 54.4 in July, hitting the highest level in more than a year. An upside surprise in NFP today is likely and the actual figure could be higher than 200k.

A solid NFP number today would solidify the case for Fed to taper the open ended $85b per month asset purchase program in September. And, that should give dollar some buying momentum to extend this week's rally. So far, the greenback has been strongest against Aussie, which is more due to expectation of another RBA cut next week. EUR/USD is indeed still staying resiliently above 1.32 level. We'll see if EUR/USD would finally catch up with others today.

From US, personal income and spending would also be released together with factory orders. Eurozone will release PPI in European session. UK PMI construction will also be featured. Released, Swiss SVME PMI rose sharply to 57.4 in July. Australian PPI rose 0.1% qoq in Q2. Japan monetary base rose 38.0% yoy in July.

Yesterday, ECB left the main refi rate unchanged at a record low of 0.5%. Policymakers acknowledged improvements in economic outlook as sentiment was lifted and the unemployment rate slipped in June. The central bank pledged to leave the interest rate for an extended period of time. In order to improve communication with the market, President Draghi unveiled the idea of publishing the minutes which have been keep in secret. More details will be released later this year. Separately, the BOE announced to leave the Bank rate at 0.5% and maintain the asset purchase program at 375B pound.