- ADP employment report: US private sector lost 10,000 jobs in August
- ISM rises to 56.3.; much stronger than expected
- Fed’s Plosser downplays utility of MBS reinvestment; opposes more QE without clear deflation dangers
- Fed’s Fisher: Ball in Congress’s court; Fed has done all it can
- S&P jumps 3.0% after ISM surprise
- US bonds slump, yields rise sharply after data; 10-yr notes up 11 bp to 2.58%
US markets opened in a risk-loving mood this morning after strong Australian and Chinese data. The mood was dimmed briefly by the downbeat ADP data which foretells a weak employment report on Friday but the expectation that the Fed will crank up the printing presses should the economy keep deteriorating limited the damage.
The EUR/USD took center stage in early New York dealing as a 1.2550/1.2850 came into play shortly after the ADP data. We rallied as high as 1.2856 before falling back after the ISM report.
Focused turned from EUR pairs to commodity plays as the best of the risk-loving strategies. In fact EUR/CAD selling was a factor in the dip in EUR/USD off the highs in addition to a rise in US bond yields. EUR/USD finds support in the short-term at the 1.2780 level. Small stops are eyed below that level. Steady real-money interest was noted to buy EUR/USD in very quiet afternoon markets.
USD/JPY jumped ahead of the data on talk of a bullish analysis by a noted NY think-tank and really took off after ISM. We jumped to the 94.67 level before sell orders from Japanese exporters were able to cool the rally. Japan missed a golden opportunity to take USD/JPY higher right after the data…
Dips were relatively shallow with most afternoon dealings in the 84.40s. It is a decent close considering after ADP were close to trend lows, slipping to 83.66.
Commodity currencies extended their gains after ADP with AUD nearing the 0.9100 level late in the day. USD ?CAD dipped below 1.05 and ends at 1.0510.
EUR/CHF and USD/CHF saw significant short-covering after the ISM data greatly lessened risk aversion. EUR/CHF ends at 1.3000 from 1.2916 NY lows. It reached 1.3040 on a squeeze. USD/CHF jumped from 1.0066 session lows to 1.0183 intraday and ends the session at 1.0155.
The first three hours of the US trading were fairly chaotic but markets barely budged through the afternoon hours, apparently content to wait for further clues on the economy. Improved claims and payrolls will keep the risk rally rolling while bad news on both will prompt renewed fears that the Fed will need to take further action.
