The Greenback’s performance was as mixed as a bag of nuts as several currency-specific factors came into play. To top it off, Fed officials have been sharing their thoughts on the central bank’s next policy moves while the ADP report printed weaker than expected results.
- U.S. ADP non-farm employment change up by 178K vs. 187K forecast
- U.S. EIA crude oil inventories fell by 1.5M barrels vs. 3.2M consensus
- U.S. President Trump signed a bill on sanctions against Russia
- Fed official Bullard: Concerned about soft inflation, Fed should stay put
- Fed official Mester: Gradual removal of accommodation still appropriate
- Fed official Williams wants to see balance sheet reduction this fall
U.S. ADP jobs report
It was a mixed bag for the ADP report as the headline reading for July came in weaker than expected at 178K versus the projected 187K figure while the previous report enjoyed an upgrade from 158K to 191K.
Market participants speculated that the actual NFP due this Friday could print similar results, as the consensus is for a 181K increase in hiring. Employment gains were broad-based according to the July ADP report, with only the manufacturing sector printing a decline in hiring of 4K.
Job gains were also seen across different company sizes, but co-head of the ADP Research Institute Ahu Yildirmaz warned that the tightening labor market could make it more difficult to hire qualified workers in the near-term.
Commentary from Fed officials
Even though the Fed officials who shared their thoughts on policy are actually non-voting members, their rhetoric probably contains some clues on how FOMC policymakers are leaning.
For Cleveland Fed President Loretta Mester, gradual removal of accommodation is still appropriate and the central bank should hike three times in the calendar year. She explained:
San Francisco Fed President Williams turned the spotlight on the balance sheet runoff, adding that it should start “this fall” but warning that it will take a year or two before inflation picks up. He also shared that policymakers haven’t made up their mind on the amount of reduction in the Fed’s balance sheet.
I see benefits to this consistency: it removes some ambiguity and it underscores the fact that we set monetary policy systematically, with a focus on the medium-run outlook and risks around the outlook and their implications for our policy goals.
Lastly, Fed official Bullard was more stern in saying that the Fed should sit on its hands after seeing soft inflation data recently. He reiterated that he wouldn’t support another hike while the core PCE price index has fallen to 1.5%, well below the Fed’s 2% target.
Major Market Mover(s):
EUR & GBP
The euro and the pound took advantage of dollar weakness and chalked up a few gains against their other forex rivals as well.
EUR/USD brushed past the 1.1900 barrier to a high of 1.1910, GBP/USD is up to 1.3222, EUR/JPY advanced from 130.80 to a high of 131.32, and GBP/JPY is up to 146.36.
Watch Out For:
- 12:30 am GMT: Australia AIG services index (54.8 previous)
- 2:00 am GMT: New Zealand ANZ commodity prices
- 2:30 am GMT: Australia trade balance (1.78B AUD expected, 2.47B AUD previous)
- 2:45 am GMT: Chinese Caixin services PMI (rise from 51.6 to 51.9 expected)