Weak NFP In Focus Ahead Of Central Bank Decisions

Weaker than expected US nonfarm payrolls take focus today, while participants look ahead to rate decisions from RBA, BoE and BoJ next week

The week’s most notable highlight came on Friday in the form of the US nonfarm payroll report, which saw the USD plummet after printing a lower than expected headline figure, revision and average hourly earnings (Change in Nonfarm Payrolls 142K vs. Exp. 201K, Prev. 173K, Rev. 136K, Average Hourly Earnings 0.0% vs. Exp. 0.2%). Some analysts had downplayed the importance of the monthly job numbers for this month given the Fed’s more global focus at the September meeting; however the significant miss on expectations combined with the downward revision to weigh on the USD after many had suggested that previous August reports had often been revised higher. As such EUR/USD immediately fell by over a point while USD/JPY fell further from the key 120.00 handle and back towards 119.00.

Away from US nonfarm payrolls, FX markets have been relatively subdued this week with few substantial moves, however price action was guided by month and quarter end demand earlier on in the week, with the likes of USD benefiting as a result and EUR/GBP under-performing.

Looking ahead, next week sees a number of central bank related news, with RBA, BoJ and BoE rate decisions as well as Fed minutes. RBA and BoE are touted to keep their stance unchanged at their meeting, while there are outside bets by the likes of Barclays that the BoJ could expand QQE next week, with analysts suggesting if the BoJ analysts hold off, it may well only be for a few weeks. The Fed minutes may also shed further light onto the most recent rate decision, which was interpreted as dovish by the market, however the fact that Fed’s Yellen held a press conference immediately after the decision limits the amount of new information that the minutes may provide.

Finally, while not expected to see a market reaction, it is worth noting that Sunday sees the Portuguese legislative elections. The vote is considered to be less of a risk event than the recent elections in both Spain and Greece due to the focus on centrist parties and the lack of a far left/right popular opposition, with both main parties promising fiscal discipline and the incumbent party currently leading in the polls.

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