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Euro, Pound to Look Past PMI Data as All Eyes Turn to US Jobs Report

Euro, Pound to Look Past PMI Data as All Eyes Turn to US Jobs Report

Ilya Spivak, Head Strategist, APAC

Talking Points

  • Markets to Look Past Eurozone, UK PMIs to Focus on US Jobs Data
  • Nonfarm Payrolls Print to be Interpreted in Terms of Growth, Not QE3

The US Dollar corrected narrowly lower in overnight trade as currency markets digested yesterday’s advance on the back of risk aversion after the European Central Bank followed the Federal Reserve in disappointing the markets’ stimulus hopes. All eyes now turn to the US Employment report. Expectations call for the economy to add 100,000 jobs in July, marking a narrow improvement from the 80,000 increase recorded in the prior month. The Unemployment Rate is forecast to hold unchanged at 8.2 percent. Separately, the ISM Non-Manufacturing Composite gauge is expected to show service-sector growth slowed to the weakest pace since January 2010.

Coming on the heels of a lackluster FOMC policy announcement earlier in the week, it seems reasonable to suspect that the day’s data set will be interpreted in terms of its direct implications for US and global economic growth rather than the outlook for Fed stimulus. That suggests a soft showing is likely to weigh on risk appetite, applying selling pressure to stocks-linked currencies while boosting the safe-haven greenback. Needless to say, a firmer set of outcomes stands to produce the opposite result. With that in mind, already spreading murmurs of QE3 to be unveiled in September leave open a possibility for a soft outcome to prove sentiment-supportive.

The final revision of July’s Eurozone Composite PMI reading stands out on the European data docket. The print is expected to confirm manufacturing- and service-sector activity contracted for the sixth consecutive. Meanwhile, UK Services PMI is seen nudging slightly higher in July after hitting an eight-month low in the prior month. On balance, the reports are unlikely to spark a strong reaction from price action given their limited implications for monetary policy in the immediate aftermath of ECB and BOE rate decisions. The proximity of the high-profile US docket will probably help mute follow-though.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

AiG Performance of Service Index (JUL)

46.5

-

48.8

1:00

CNY

Non-manufacturing PMI (JUL)

55.6

-

56.7

2:30

CNY

HSBC Services PMI (JUL)

53.1

-

52.3

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

CHF

UBS Real Estate Bubble Index (2Q)

-

0.95

Low

7:45

EUR

Italian PMI Services (JUL)

43.5

43.1

Low

7:50

EUR

French PMI Services (JUL F)

50.2

50.2

Low

7:55

EUR

German PMI Services (JUL F)

49.7

49.7

Medium

8:00

EUR

Euro-Zone PMI Composite (JUL F)

46.4

46.4

Medium

8:00

EUR

Euro-Zone PMI Services (JUL F)

47.6

47.6

Medium

8:30

GBP

PMI Services (JUL)

51.6

51.3

Medium

8:30

GBP

Official Reserves (Changes) (JUL)

-

$914M

Low

9:00

EUR

Euro-Zone Retail Sales (MoM) (JUN)

-0.1%

0.8%

Medium

9:00

EUR

Euro-Zone Retail Sales (YoY) (JUN)

-1.9%

-0.8%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2074

1.2345

GBPUSD

1.5444

1.5632

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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