Markets focus will now turn to employment data after passing all central banks meeting this week. Analysts expect US NFP to show 111k job growth in September, up from August's 96k. Unemployment rate is expected to rise from 8.1% to 8.2%. Looking at the leading indicators, ADP employment report was ok at 162k even though it dropped from 189k in August. ISM manufacturing employment made an impressive improvement from 51.6 to 54.7. But the ISM services employment deteriorated from 53.8 to 51.1.
The 4 week moving average of initial jobless claims was slightly up from 371k to 375k. The overall picture suggests that NFP wouldn't give much surprise. And, as the Fed has now adopted an open ended QE which ties to the unemployment condition, today's data should do much to change markets expectation of Fed's QE program. Canada will also release job data and is expected to show 15k growth in September with unemployment rate unchanged at 7.3%.
BoJ left rates unchanged near 0% as widely expected. The asset purchase program was also held unchanged at JPY 55T. The central bank noted that Japan's economy is "more or less leveling off." That compared to last month's description that "the pick-up in economic activity has come to a pause." The BOJ said it would keep policy unchanged for now and pledged to continue asset purchases and other "powerful monetary easing" to spur growth. In a rare act, Economics Minister Seiji Maehara attended the rate review meeting urged BoJ to "pursue powerful monetary easing to achieve its price target."
The September FOMC minutes gave reasons on the Fed's decision to announce QE3 last month. While little news was delivered, the minutes unveiled that policymakers had a vigorous discussion about shifting from calendar date-based policy targets toward data-driven thresholds. The members also debated on means to reach a consensus economic forecast, the mechanism, upon completion, would replace the current method that each of the 19 members makes forecasts on his own. While the pace and timing of asset purchases remained unknown, it's expected that the QE3 would be continued for at least 2 years until policymakers see improvement in the job market.
As expected, the October ECB meeting was a non-event. Policymakers decided to leave interest rates unchanged while little surprise was heard from the press conference. President Draghi also stated that there was no discussion about the cutting the policy rates at the meeting, reinforcing our view that the central bank would leave interest rates unchanged till the year end.
The press conference was focused on the OMT and Draghi reiterated the ECB would give no view on bond yields. The ECB would also not purchase Irish or Portuguese bonds until they have regained full market access. The president also indicated that activation of the OMT would be determined by the governments. Many viewed his comments as a call for Spain and the Eurogroup to activate an ESM program.