BoE and ECB Meetings
Amid thin trading, USD gained across the board during the New York session as AUD and NZD remained under pressure. USDJPY gained about 30 pips following the ADP employment report which showed that 162k jobs were added in September (prior: 189k, consensus; 140k). Our economists note that ADP errors relative to the BLS payroll data estimates (released on Friday) have been large and frequent, badly overestimating the BLS data in four of the last six months. The non-manufacturing ISM rose to 55.1 in September against a consensus estimate of 53.4. The details showed that business activity and new orders outperformed while the employment index fell to 51.1 from a prior reading of 53.8. EURUSD traded in ranges around the 1.29 level as markets await policy direction on Greece and Spain. Greek Finance Minister Stournaras noted that differences with the Troika on finalizing the budget cuts are “fairly big” and Greece is working towards finding a compromise. The ECB will convene its policy meeting ahead today. We expect the central bank to hold its benchmark rate at 0.75%. In the UK, PMI services dropped to 52.2 in September from 53.7 in August though forward-looking components like new business and business expectations presented a more optimistic picture. The BoE’s MPC will meet today. We are with consensus in not expecting any change in policy but expect the MPC to increase the size of the asset purchase programme by GBP50 bn in November. Ahead today, the FOMC minutes will probably give further insights into the September QE3 decision. Also on tap are the retail sales report in Australia and Ivey PMI data in Canada. UBS expects a 1.0% m/m gain in Australian retail sales in August (consensus: 0.4%) which could offer some support to AUD.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank