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Today is another NFP Friday so trading conditions were relatively tight as traders hunkered down. The session wasn’t a total snooze fest, though, since the pound and the euro both found enough buyers to keep the session interesting.

  • Swiss retail sales y/y: -0.7% vs. 1.7% expected, same as previous
  • Swiss manufacturing PMI: 61.2 vs. 60.4 expected, 60.9 previous
  • Spanish manufacturing PMI: 52.4 vs. 54.4 expected, 54.0 previous
  • Italian manufacturing PMI: 56.3 vs. 55.3 expected, 55.1 previous
  • French final manufacturing PMI: unchanged at 55.8 as expected
  • German final manufacturing PMI: 59.3 vs. no change from 59.4 expected
  • Euro Zone final manufacturing PMI: unchanged at 57.4 as expected
  • U.K. manufacturing PMI: 56.9 vs. 55.0 expected, 55.3 previous
  • U.S. NFP report coming up

Major Events/Reports

NFP Friday!

Today is another NFP Friday. And as usual, both directional movement and volatility were in limited supply as forex traders hunkered down ahead of that top-tier event.

And also as usual, Forex Gump has a preview for the U.S. NFP report. So if you need to get up to speed on what happened last time and what’s expected this time, then make sure to read his write-up here.

U.K. manufacturing PMI rises

The U.K.’s manufacturing PMI report from Markit is finally out. And according to Markit’s report, the U.K.’s headline manufacturing PMI jumped from 55.3 to a four-month high of 56.9 in August.

This is great news because the reading was expected to deteriorate to 55.0. Not only that, commentary and anecdotal evidence presented by Markit were also positive overall.

Markit, for example, noted that “All five of the PMI components – output, new orders, employment, suppliers’ delivery times and stocks of purchases” printed stronger readings in August, so the improvement was broad-based.

Moreover, “Production rose at the steepest pace in seven months” while “Input price inflation accelerates for first time in seven months.”

Further commentary from Markit noted that “The domestic market was the prime source of new contract wins, while the trend in new export business also remained robust.”

This is a good sign for consumer spending since consumer spending has been weakening recently.

ECB’s Nowotny speaks

ECB Governing Council Member Ewald Nowotny gave a speech during the later half of the morning London session.

The main takeaway from his speech is that the Euro Zone is expected to grow but rate hikes are out of the question until inflation picks up. Of course, that’s a pretty standard message and the ECB has been saying that during the past several ECB statements.

As such, Nowotny’s speech wasn’t really that important to forex traders. However, Nowotny’s side comments to journalists were.

You see, Nowotny was asked about the euro’s strength this year, especially against the dollar. And Nowotny just shrugged that off by saying that he “would not over-interpret or dramatise this development.”

This apparently revived the idea that the euro’s recent rise is not enough to dissuade the ECB from tightening its monetary policy.

Well, that’s how some market analysts interpreted it. And that’s likely how algos and most human market players interpreted it since both the euro and European bond yields jumped when Nowotny said those magic words.

Appetite for risk persists

Risk-taking persisted in Europe for the third consecutive day, so most of the major European equity indices are currently on course to ending the trading week on a high note. This also means that European equity indices are starting the month of September on a high note as well.

The upcoming NFP report may change all that of course. Anyhow, market analysts say that today’s bout of risk-taking was prompted by positive earnings reports and expectations that financial conditions in the Euro Zone won’t be tightening in the near future.

  • The pan-European FTSEurofirst 300 was up by 0.52% to 1,476.95
  • Germany’s DAX was up by 0.83% to 12,155.00
  • The blue-chip Euro Stoxx 50 was up by 0.67% to 3,450.50

U.S. equity futures were also raking in gains, hinting that the risk-on vibes may carry over into the upcoming U.S. session.

  • S&P 500 futures were up by 0.21% to 2,475.25
  • Nasdaq futures were up by 0.23% to 6,004.75

Major Market Mover(s):

EUR

Price action on the euro was choppy for the most part until ECB Nowotny’s comments apparently gave the euro a bullish infusion across the board. The bullish boost even allowed the euro to steal a win from the pound (for now at least).

EUR/AUD was up by 36 pips (+0.25%) to 1.5017, EUR/JPY was up by 32 pips (+0.25%) to 131.27, EUR/CHF was up by 17 pips (+0.15%) to 1.1435

GBP

The pound was the only real mover during the session until the pesky euro decided to join in on the fun. Anyhow, the source of the pound’s strength was very likely the upbeat manufacturing PMI report since the pound jumped across the board when the report was released and then proceeded to steadily extend its gains after that.

GBP/NZD was up by 26 pips (+0.14%) to 1.8068, GBP/JPY was up by 31 pips (+0.22%) to 142.56, GBP/AUD was up by 35 pips (+0.21%) to 1.6308

USD

Volatility on Greenback pairs was limited and price action was choppy to boot. Even so, it’s worth noting that the Greenback was the worst-performing currency of the session.

There were no apparent weakness for the Greenback, however, although preemptive positioning by shorts and unwinding by bulls ahead of the upcoming NFP report is a possibility.

EUR/USD was up by 31 pips (+0.26%) to 1.1915, GBP/USD was up by 31 pips (+0.24%) to 1.2941, NZD/USD was up by 8 pips (+0.11%) to 0.7162

Watch Out For:

  • 12:30 pm GMT: U.S. non-farm employment change (180K expected, 209K previous), jobless rate (steady at 4.3% expected), and average hourly earnings (0.2% expected, 0.3% previous)
  • 1:30 pm GMT: Markit’s Canadian manufacturing PMI (55.5 previous)
  • 1:45 pm GMT: Markit’s final U.S. manufacturing PMI (no change from 52.5 expected)
  • 2:00 pm GMT: ISM U.S. manufacturing PMI (56.5 expected, 56.3 previous)
  • 2:00 pm GMT: University of Michigan’s revised consumer sentiment index (97.4 vs. 97.6 previous)