Asia was on Non-farm payroll alert Friday with activity confining currency pairs to tight ranges during the session, though with a slight risk-off bias.
The only data release concerned Australia’s construction sector with the PMI reading for June holding mostly steady at 34.8 from 34.7, albeit deep in contraction territory and still close to the 2009 low. This marked the 25th month of contraction in a row and reflects a lack of demand in the apartment building, commercial construction and house building categories. Despite the recent RBA cuts, lack of demand and access to finance remain issues for the sector and forward looking indicators suggest an extended period of weakness.
Central bank actions Thursday were broadly in line with market expectations though reaction in the currency sphere was markedly different. A surprise 25bp from the PBOC added to the mix but risk appetite was not particularly responsive to all the action. Indeed the Shanghai Composite’s positive reaction to the cuts lasted only a short period and the index slipped into the red to match other falls across the region.
The Bank of England added an additional £50 bln worth of quantitative easing and the pound eventually succumbed to mild pressure. The ECB cut the benchmark rate by 25bp to 0.75 percent and the deposit rate to zero, both as expected, but the EUR slumped across the board as ECB’s Draghi’s press conference revealed a bleak outlook for the economy and an overall dovish outlook. EURUSD hit a 5-week low. The AUD spiked higher after the PBOC cut but the weight of the EUR’s direction limited gains to 1.0330 versus the US dollar.
On the data front, German factory orders were better than forecast at +0.6% m/m while from the US Challenger job cuts came in at -9.4 percent versus +66.7 percent prior. The ADP employment report showed 176k jobs added in June, better than the 100k expected and an increase on the 136k last time. In addition, jobless claims were below forecast with a 374k print versus 385k expected and 388k prior. The only negative data point was the ISM non-manufacturing index slipping to 52.1 from 53.7 (53.0 expected) but to complete the positive employment vibes the employment sub-index rose to 52.3 from 50.8.
Data Highlights
UK Jun. Challenger Job Cuts out at -9.4% y/y vs. +66.7% prior
US Jul. RBC Consumer Outlook Index out at 47.0 vs. 46.1 prior
US Jun. ADP Employment Change out at +176k vs. 100k expected and revised 136k prior
US Initial Jobless Claims out at 374k vs. 385k expected and revised 388k prior
US Continuing Claims out at 3306k vs. 3300k expected and revised 3302k prior
US Bloomberg Consumer Comfort Index out at -37.5 vs. -36.1 prior
US Jun. ISM Non-manufacturing out at 52.1 vs. 53.0 expected and 53.7 prior
AU Jun. AiG Performance of Construction Index out at 34.8 vs. 34.7 prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Leading/Coincident Indices (0500)
Sweden Unemployment Rate (0600)
Swiss CPI (0715)
Sweden Budget Balance (0730)
Norway Industrial Production (0800)
UK PPI Input/Output (0830)
GE Industrial Production (1000)
CA Unemployment Rate (1230)
US Change in Non-farm Payrolls (1230)
US Unemployment Rate (1230)
CA Building Permits (1230)
CA Ivey PMI (1400)
Andrew Robinson,
SAXO BANK