The dollar and the pound continued their dominance in the New York trading session while crude oil and U.S. equities were in better spirits as Tropical Storm Harvey weakened.
- ADP non-farm employment up by 237K vs. 185K forecast in Aug
- ADP July reading upgraded from 178K to 201K
- U.S. preliminary Q2 GDP reading upgraded from 2.6% to 3.0% vs. 2.7% consensus
- U.S. preliminary GDP price index up by 1.0% as expected in Q2
- U.S. crude oil inventories down by 5.4M barrels vs. expected 1.8M drop
- Canadian current account deficit widened from 12.9B CAD to 16.3B CAD
Upbeat U.S. economic data
All green for Uncle Sam! The latest batch of U.S. data turned out better than expected, reviving some hope for another Fed rate hike in the coming months.
First up, the ADP non-farm employment change reading, which is often treated as a benchmark for the actual NFP report, printed a gain of 237K versus the projected 185K increase for August. To top it off, the July figure was positively revised from the initially reported 178K gain to 201K, signaling that previous NFP jobs reports might also enjoy upgrades.
Next, the preliminary GDP reading for Q2 was also upgraded from 2.6% to 3.0%, outpacing the consensus at 2.7%. Components of the report revealed that the revision was spurred by higher personal consumption expenditure, which was revised to show 3.3% growth from the previously reported 2.8% increase.
The preliminary GDP price index for the period was unchanged at 1.0% as expected. Fed funds futures, which is considered a gauge of rate hike expectations, signaled stronger likelihood of a rate hike from 32% earlier in the week to 40% after the GDP update.
Commodities still shaky
The improvement in risk appetite from earlier trading sessions, combined with the weakening tropical storm Harvey and a larger than expected draw in crude oil stockpiles, boosted Black Crack prices during the opening bell.
The Energy Information Administration reported that stockpiles were down 5.4 million barrels in the previous week, thrice as much as the projected drop of 1.8 million barrels. This runs contrary to expectations that inventories would balloon as several barrels of crude oil would be kept online while refineries in the Harvey-hit areas are shut down.
However, commodities failed to hold on to their winnings, with precious metals giving up some of their previous safe-haven gains:
- WTI crude oil popped to a high of $46.51 per barrel then retreated back to $46.02 per barrel
- Brent crude oil is down 1.80% to $50.73 per barrel
- Gold is down 0.47% to $1,312.76 per troy ounce
- Silver is down 0.21% to $17.389 per troy ounce
Trump talks tax reform
Just when U.S. markets seemed to be down on their luck dealing with the projected aftermath of Harvey and facing threats from North Korea, the Donald seized the opportunity to make America feel great again.In a speech in Springfield, MO, the U.S. President threw the spotlight on tax reform by reiterating the administration’s plans to reduce the burden on companies and workers. In particular, he declared that he’d like to see the corporate tax rate at 15%. Trump then emphasized that the U.S. economy will make a comeback and would even see more than 3% GDP growth.
He also threw shade on lawmakers that have been giving him a tough time by saying that he doesn’t want to be disappointed by Congress. As for NAFTA, Trump mentioned that renegotiations are still going on but if they don’t cut a deal that he likes, he will end it. Tough talk.
Major Market Mover(s):
The pound continued to slay during the U.S. trading session as traders unwound their Brexit shorts and picked up on stronger risk-on vibes.
EUR/GBP is down from .9265 to .9202 (-0.67%), GBP/CAD jumped to a high of 1.6332 (+0.88%), GBP/CHF is up to 1.2451 (+0.87%), and GBP/NZD is up from 1.7812 to 1.7950 (+0.77%)
USD & JPY
The dollar and yen were back in the winners’ circle as both lower-yielding currencies managed to end positive for the session.
EUR/USD is down to 1.1890 (-0.68%), AUD/USD is testing support at the .7900 mark (-0.62%), USD/JPY climbed from 109.70 to 110.31 (+0.57%), and USD/CHF is up to .9638 (+0.87%)
CAD/JPY retreated to 87.41 (-0.29%), NZD/JPY is down to 79.40 (-0.26%), EUR/JPY fell from 131.32 to 131.17 (-0.11%), and AUD/JPY is down to 87.16 (-0.08%)
Watch Out For:
- 12:01 am GMT: U.K. GfK consumer confidence index (drop from -12 to -13 expected)
- 12:50 am GMT: Japanese preliminary industrial production (-0.4% expected, +2.2% previous)
- 2:00 am GMT: Chinese official manufacturing PMI (51.3 expected, 51.4 previous)
- 2:00 am GMT: Chinese official non-manufacturing PMI (54.5 previous)
- 2:30 am GMT: Australia private sector credit m/m (0.5% expected, 0.6% previous)
- 2:30 am GMT: Australia private capital expenditure q/q (0.2% expected, 0.3% previous)
- 6:00 am GMT: Japanese housing starts y/y (-0.2% expected, +1.7% previous)