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US Dollar Looks to Services ISM to Guide Fed Rate Hike Speculation

US Dollar Looks to Services ISM to Guide Fed Rate Hike Speculation

Talking Points:

  • Euro may be more response to Retail PMIs vs. 2Q GDP revision
  • US Dollar looks to services ISM to shape Fed rate hike outlook
  • Aussie Dollar little-changed after status-quo RBA rate decision

The final revision of second-quarter Eurozone GDP figures as well as Augusts’ Retail PMI roundup for the single currency area headline the economic calendar in European trading hours. The former reading may pass with little fanfare because the data mostly covers the period preceding the UK “Brexit” referendum. The latter set of figures may help show if uncertainty following the vote is cooling activity on the Continent.

News-flow out of the region has rapidly deteriorated relative to consensus forecasts over the past three weeks, opening the door for a downside surprise. That may weigh on the Euro as traders speculate that the ECB will have to make good on the pledge to boost stimulus in the near term as conditions deteriorate. An upbeat result will probably fall on deaf ears however considering the central bank’s overtly dovish posture.

Later in the day, the spotlight will turn to Augusts’ ISM Non-Manufacturing Composite survey. Expectations suggest service-sector activity growth slowed for a second consecutive month. A soft result in line with a string of disappointing outcomes over the past two months may pour cold water on Fed rate hike speculation, sending the US Dollar lower. Needless to say, an upside surprise may boost the greenback.

The Yen traded lower as risk appetite firmed in overnight trade, undermining support for the anti-risk currency. Indeed, prices intraday price swings mirrored Japan’s benchmark Nikkei 225 stock index. The Australian Dollar rose alongside front-end bond yields ahead of the RBA rate decision, seemingly reflecting bets on a status-quo result. Prices were little-changed when the central bank delivered as expected.

Asia Session

22:00NZDANZ Truckometer Heavy (MoM) (AUG)6.7%--5.3%
23:01GBPBRC Sales Like-For-Like (YoY) (AUG)-0.9%1.4%1.1%
23:30AUDANZ Roy Morgan Weekly Consumer Conf 114.3-118.4
0:00NZDQV House Prices (YoY) (AUG)14.6%-14.1%
1:30AUDNet Exports of GDP (2Q)-0.21.1
1:30AUDBoP Current Account Balance (2Q)-15.5b-20.0b-14.9b
4:30AUDRBA Cash Rate Target 1.50%1.50%1.50%

European Session

5:45CHFGDP (QoQ) (2Q)0.6% (A)0.3%Medium
5:45CHFGDP (YoY) (2Q)2.0% (A)1.1%Medium
6:00EURGermany Factory Orders (MoM) (JUL)0.2% (A)-0.3%Medium
6:00EURGermany Factory Orders (YoY) (JUL)-0.7% (A)-3.0%Medium
7:15CHFCPI (MoM) (AUG)-0.1%-0.4%Medium
7:15CHFCPI (YoY) (AUG)-0.1%-0.2%Medium
7:15CHFCPI - EU Harmonized (MoM) (AUG)-0.1%-0.1%Low
7:15CHFCPI - EU Harmonized (YoY) (AUG)0.0%-0.5%Low
7:30EURMarkit Germany Construction PMI (AUG)-51.6Medium
8:10EURMarkit Germany Retail PMI (AUG)-52.0Medium
8:10EURMarkit Eurozone Retail PMI (AUG)-48.9Medium
8:10EURMarkit France Retail PMI (AUG)-51.6Low
8:10EURMarkit Italy Retail PMI (AUG)-40.3Low
9:00EUREurozone GDP SA (QoQ) (2Q F)0.3%0.3%Medium
9:00EUREurozone GDP SA (YoY) (2Q F)1.6%1.6%Medium
9:00EUREurozone Gross Fix Cap (QoQ) (2Q)-0.1%0.8%Low
9:00EUREurozone Govt Expend (QoQ) (2Q)0.2%0.4%Low
9:00EUREurozone Household Cons (QoQ) (2Q)0.3%0.6%Low
9:40GBPBOE ILTR Operation Results --Low
13:50GBPBOE Bond-Buying Operation Results --Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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