CFD Markets News and Forecasts — 03-09-2021

eFXdata reports that CIBC Research provides its vies on today's US jobs report for August.

"Hiring in the US slowed dramatically in August, as the recovery in service sectors impacted by Covid stalled. The 235K jobs created were well below the consensus expectation of 733K even when accounting for the +134K revision to the prior two months. Leisure and hospitality showed no change in the level of employment, while retail trade payrolls dropped off, and hiring in other sectors was modest."

"This disappointing report will make it a closer call than we expected for a September tapering announcement from the Fed." 

FXStreet notes that August's Nonfarm Payrolls figures have badly disappointed. Going forward, economists at TD Securities suggest USD could begin to stall. 

“Payrolls rose 235K, well below consensus. Revisions add 134K. Unemployment fell to 5.2% from 5.4%, with household survey employment up 509K. Average hourly earnings were strong: +0.6% MoM; the YoY pace rose to 4.3% from 4.1%.”

“We think there may be more two-way risk around the USD than the markets appreciate. Unless the Fed does an about-face on taper, which is highly unlikely, we think downside in the dollar will be contained to the post-June Fed range lows.”

“We think currencies that have very obvious firm growth and more immediate policy profiles stand a better chance at outperforming the USD. Here, the NZD fits that bill. AUD on the other hand suffers from a softening China story, but the RBA seems content on progressing to taper and we are likely past the worst on the macro front there.”

“We would expect EUR/USD to find strong resistance into 1.1909 ahead of the ECB meeting (1.1975 if it fails to hold). What will make it challenging for EUR to hold onto gains is that the US real yield backdrop should continue to diverge from the rest of Europe."

The Institute for Supply Management (ISM) reported on Friday that its non-manufacturing index (NMI) came in at 61.7 in August, which was 2.4 percentage points lower than the all-time high reading of 64.1 in July. The latest reading pointed to the growth in the services sector for the 15th straight month.

Economists forecast the index to decrease to 61.5 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 services industries, 17 reported gains last month, the ISM said, even though the tight labor market, materials shortages, inflation and logistics issues continue to cause capacity constraints.

According to the report, the ISM’s non-manufacturing Production measure plunged 6.9 percentage points to 60.1 percent from the August reading, while its New Orders gauge decreased 0.5 percentage point to 63.2 percent and the Employment indicator edged down 0.1 percentage point to 53.7 percent. Elsewhere, the Supplier Deliveries index fell 2.4 percentage points to 69.6 percent, while the Inventories indicator dropped 2.3 percentage points to 46.9 percent. On the price front, the Prices index declined 6.9 percentage points to 75.4 percent.

Commenting on the data, the Chair of the ISM Services Business Survey Committee, Anthony Nieves, noted, “The past relationship between the Services PMI and the overall economy indicates that the Services PM for August (61.7 percent) corresponds to a 4.4-percent increase in real gross domestic product (GDP) on an annualized basis."

James Knightley, the Chief International Economist at ING, offers his view on the latest U.S. jobs data.

"We have a huge downside miss for non-farm payrolls in August, coming in at 235k versus 733k consensus. There were 133k of upward revisions, but it is still far weaker than hoped. Coupled with the resurgence of Covid it likely removes any chance of a Fed September taper, but November still looks good."

"Rising Covid cases have clearly impacted industries such as leisure and hospitality given the numbers we have seen on restaurant bookings and air travel and it is also evident in today’s labour data with a net zero jobs in this sector created last month. Retail fell 29k while construction, government and temporary help supply were down a fraction."

"However, before we get too gloomy we need to acknowledge that the household survey tells a better story with the unemployment rate dropping to 5.2% from 5.4% with household employment rising 509k. Meanwhile wages surged 0.6% month-on-month/4.3% year-on-year."

"As for the Fed taper, Fed Chair Powell remains more cautious than many of his colleagues with the resurgence of Covid leading him to warn against implementing an “ill-timed policy move” at last week’s Jackson Hole Symposium. Another of his key quotes was “we have much ground to cover to reach maximum employment” before the Fed can say “substantial further progress” condition has been met. After today’s soft figure employment does indeed remain 5.33mn below the February 2020 peak so this will likely dampen the enthusiasm from several regional Fed Presidents for a September taper. Given our reasons for optimism November looks a decent date for that announcement with a December start point."

U.S. stock-index futures traded flat on Friday, as investors assessed the much-anticipated U.S. Employment Situation report for August, which showed a softer-than-expected job growth and a bigger-than-forecast gain in hourly earnings.

Global Stocks:

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The U.S. Labor Department announced on Friday that nonfarm payrolls rose by 235,000 in August after a revised 1,053,000 increase in the prior month (originally a gain of 943,000). This was the smallest monthly advance since January.

According to the report, notable job gains were recorded in professional and business services (+74,000), transportation and warehousing (+53,000), private education (+40,000), manufacturing (+37,000), and other services (+37,000). At the same time, employment in retail trade (-29,000) declined over the month.

The unemployment rate dropped to 5.2 percent in August from 5.4 percent in July. This was the lowest rate since March 2020. Still, the rate remained well above the pre-crisis level of about 3.5 percent.

Economists had forecast the nonfarm payrolls to increase by 750,000 and the jobless rate to drop to 5.2 percent.

The labor force participation rate remained unchanged m-o-m at 61.7 percent, while hourly earnings for private-sector workers rose 0.6 percent m-o-m (or $0.17) to $30.73, following an unrevised 0.4 percent m-o-m gain in July. Economists had forecast the average hourly earnings to increase 0.3 percent m-o-m in August. Over the year, the average hourly earnings jumped 4.3 percent in August, following a revised 4.1 percent climb in July (originally a gain of 4.0 percent).

The average workweek was unchanged at 34.7 hours in August, being slightly above economists' forecast for 34.8 hours.

FXStreet reports that AUD/USD has extended to “last resort” resistance at the 0.7428 high ahead of payrolls. In the opinion of economists at Credit Suisse, the aussie needs to hold below this level into the close to avoid a large base.

“The break above the 55-day average increases the risk that the market may now be forming a large base, however, while the key price high at 0.7428 holds into the close, we maintain our base case view that the recent recovery is a corrective move higher.”

“First signs of a turn back lower would be given below 0.7394/92, as this would put the market back below the 55-day average, with the next support then seen at 0.7355, before 0.7288/84.”

FXStreet reports that economists at MUFG Bank believe that the Reserve bank of New Zealand's (RBNZ) rate hike plans are set to encourage a stronger NZD.

“The timing of the first reports of an outbreak was just before the RBNZ met and this scuppered the plans to raise rates for the first time. Since then though plans are being rolled out for the country to come out of lockdown as cases look to be plateauing and hence we see this as temporary and we are maintaining our current forecasts for NZD appreciation ahead.” 

“Governor Orr indicated the probability of rate hikes soon even if COVID-19 remains in the community. Assistant Governor Hawesby went further by explaining the decision to hold off hiking was more about the optics of hiking on a day the country went into a lockdown. He also admitted the RBNZ discussed hiking by 50bps.”

“More likely is that COVID-19 is contained to a greater degree than elsewhere which allows the RBNZ to begin tightening on 6th October – helping provide NZD with key support ahead.”

FXStreet notes that GBP/USD has finally broken above a cluster of resistances including its 200-day moving average (DMA) at 1.3807/36, and analysts at Credit Suisse look for a deeper swing higher in the broader converging range with resistance seen next at 1.3875/88.

“Resistance is seen next at 1.3875/88 ahead of the 50% retracement at 1.1910, with the next major resistance cluster seen at 1.3968/90 – the July highs, 61.8% retracement and top of the converging range. We would look for a fresh top here.” 

“Support is seen at 1.3807/02 initially, then 1.3782, with a break below the short-term uptrend at 1.3766/59 needed to ease the immediate upside bias.”

Hewlett Packard Enterprise (HPE) reported Q3 FY 2021 earnings of $0.47 per share (versus $0.32 per share in Q3 FY 2020), beating analysts’ consensus estimate of $0.42 per share.

The company’s quarterly revenues amounted to $6.897 bln (+1.2% y/y), roughly in line with analysts’ consensus estimate of $6.932 bln.

HPE closed Thursday's trading session at $15.39 (+0.33%).

FXStreet reports that economists at Société Générale suggest that EUR/USD should retest 1.1910.

“A return to the middle of the three-month range around 1.1965 (1.1662-1.2265) is not impossible if the dollar can’t rediscover its poise after payrolls today.”

“EUR/USD has entered daily Ichimoku cloud and could head higher towards 1.1910 with possibility to retest 200-DMA at 1.1980/1.2010.”

“Consolidation above 1.1730 will be crucial for rebound.”

Broadcom (AVGO) reported Q3 FY 2021 earnings of $6.96 per share (versus $5.40 per share in Q3 FY 2020), beating analysts’ consensus estimate of $6.91 per share.

The company’s quarterly revenues amounted to $6.778 bln (+16.4% y/y), roughly in line with analysts’ consensus estimate of $6.757 bln.

The company also issued upside guidance for Q4 FY 2021, projecting revenues of ~$7.35 bln versus analysts’ consensus estimate of $7.24 bln.

AVGO closed Thursday's trading session at $491.9 (-0.26%).

FXStreet reports that UOB Group’s FX Strategists believe USD/CNH could slip back to the 6.4300 level in the next weeks.

24-hour view: “We highlighted yesterday that ‘downward pressure is beginning to ease but it appears too soon to expect a recovery’ and we expected USD to ‘consolidate and trade between 6.4450 and 6.4650’. Our view for consolidation was not wrong but USD traded within a narrower range than expected (6.4478/6.4591). The underlying tone has weakened somewhat and USD could drift lower today. Barring a sudden surge in downward momentum, the major support at 6.4300 is not expected to come into the picture (there is another support at 6.4400). Resistance is at 6.4540 followed by 6.4650.”

Next 1-3 weeks: “USD subsequently edged below 6.4500 but was unable to make much headway on the downside. That said, it closed at 6.4479 yesterday (02 Sep). Downward momentum is showing tentative signs of improving and USD could drift lower t0 6.4300. On the upside, a break of 6.4710 (‘strong resistance’ level previously at 6.4750 previously) would indicate that the current mild downward pressure has eased."

“China’s various industry crackdowns from technology to education mean monetary and fiscal policies will likely remain loose on the margin to offset the drag on economic growth,” FXStreet reports, citing Goldman Sachs economists' view, quoted by Bloomberg.

“Monetary and fiscal policy will need to ease to counterbalance the drags.”

“Economic data will probably be weak in August, before a rebound in September and a strong fourth quarter on a sequential basis.” 

“Without policymakers communicating their thinking behind the new regulations, markets are prone to interpret such regulatory actions as an attack on profitable private companies and signs that economic growth and market liberalization are no longer important to the government.”

EUR depreciated slightly against most of its major rivals in the European session on Friday, as investors assessed the latest reports on Eurozone’s services sector PMI and retail sales data for July, while awaiting the most important event of the week - the release of the U.S. jobs data for August later today.

The latest report by IHS Markit revealed that the Eurozone’s services sector saw a slight loss of growth momentum in August after hitting a 15-year high in the previous month. According to the report, the IHS Markit Eurozone PMI Services Business Activity Index came in at 59.0 in August, down from 59.8 in July and a flash estimate of 59.7. Economists had forecast the indicator to stay unrevised at 59.7.

Meanwhile, the data, provided by Eurostat this morning, showed an unexpected decline in the euro area's retail trade volumes in July. According to the report, the seasonally adjusted volume of retail trade in the Eurozone fell by 2.3% m/m in July, following a revised 1.8% m/m advance in June (originally a 1.5% m/m gain). On a y/y basis, the region’s adjusted retail sales climbed by 3.1%, following a revised 5.4% surge in June (originally a 5.0% jump). This was the smallest gain in five months. Economists had forecast the Eurozone’s retail sales in July would increase 0.1% m/m and 4.8% y/y.

Investors are waiting edgily for the U.S. August employment situation report, which will be released at 12:30 GMT and is expected to be a catalyst for the currency market, as it could provide clues on the timing of the Federal Reserve’s pullback in bond buying and determine the direction of the U.S. currency.

• Will improve financial risk prevention, warning, disposal and responsibility system
• Will maintain stable operation of stock, bond and forex markets, and prevent external shocks
• Will push forward reform of small and medium financial institutions to resolve risks

Eurostat, the statistical office of the European Union (EU) reported on Friday that the seasonally adjusted volume of retail trade in the Eurozone fell by 2.3 percent m-o-m in July, following a revised 1.8 percent m-o-m advance in June (originally a 1.5 percent m-o-m gain).

In y-o-y terms, adjusted retail sales climbed by 3.1 percent, following a revised 5.4 percent surge in June (originally a 5.0 percent jump). This was the smallest gain in five months.

Economists had forecast the Eurozone’s retail sales in July would increase 0.1 percent m-o-m and 4.8 percent y-o-y.

According to the report, the July monthly plunge was attributable to the lower retail sales of non-food products (-3.5 percent m-o-m), automotive fuels (-1.6 percent m-o-m) and food, drinks and tobacco (-0.7 percent).

In y-o-y terms, all three major groups - non-food products (+4.8 percent), food, drinks and tobacco (+1.1 percent) and automotive fuel (+0.6 percent) - recorded gains in retail sales in July.

The report from IHS Markit and Chartered Institute of Procurement & Supply (CIPS) indicated on Friday that August was the worst month for business activity growth in the UK’s service sector since the current phase of recovery began in March.

According to the report, the Markit/CIPS UK Services Purchasing Managers' Index (PMI) fell to 55.0 in August, which was down from 59.6 in July and the preliminary estimate of 55.5, and well below May's record high of 62.9. This represented the lowest reading since February as well.

Economists had forecast the indicator to stay unrevised at 55.5. The 50 mark divides contraction and expansion.

According to the report, new order growth weakened, partly due to the end of the full stamp duty holiday and a subsequent cooling in consumer demand arising from residential property transactions. Meanwhile, backlogs of work increased solidly, due to staff shortages. The rate of job creation surged higher than the previous record seen in June 2014 and a subsequent lack of candidates to fill vacancies led to steep gains in wages. On the price front, strong pay pressures, growing fuel bills and increasing transport costs were the main factors contributing to higher operating expenses in August. Mirroring the trend for input prices, the prices charged inflation eased only slightly from July's peak.

The UK All Sector Output Index, a weighted average of the UK Manufacturing Output Index, the UK Total Construction Activity Index and the UK Services Business Activity Index, came in at 54.8 in August, down from 59.2 in July. This was the lowest reading for six months.

The report from IHS Markit revealed on Friday that activity in Eurozone’s services sector saw a slight loss of growth momentum in August after hitting a 15-year high in the previous month.

According to the report, the IHS Markit Eurozone PMI Services Business Activity Index came in at 59.0 in August, down from 59.8 in July and a flash estimate of 59.7.

Economists had forecast the indicator to stay unrevised at 59.7.

According to the report, growth in new business intakes slowed in August, but it was notably stronger than seen on average over the series history. Meanwhile, the rate of jobs growth matched that seen in July, which was the strongest since September 2018. Price trends diverged in August, with a stronger gain in costs coinciding with a softer rise in selling charges. Input prices increased at the fastest pace in 13 years.

From a country perspective, Ireland service providers continued to outperform their euro-area peers during the latest survey period, while those in France registered the weakest expansion in service sector activity. However, with the exception of Italy where growth was flat, rates of expansion decelerates in all nations from July.

The IHS Markit Eurozone PMI Composite Output Index decreased to 59.0 in August from 60.2 in the previous month, being revised down slightly from the flesh estimate of 59.5. The latest reading still indicates one of the fastest rates of growth seen in the past 15 years.

USD traded flat against most of its major counterparts in the Asian session on Friday ahead of the release of the U.S. employment situation report later today, which is expected to provide clues on the timing of the Federal Reserve’s pullback in bond buying.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, edged up 0.01% to 92.24.

Progress on employment is crucial for the U.S. central bank. The Fed's Chairman Jerome Powell suggested last week that he would like to assess incoming data on the labor market before committing to a taper timeline. That means the August NFP report could be more consequential than usual.

The latest labour market indicators were predominantly weaker. The ADP’s employment report, which is viewed as a preview for the official jobs report, disappointed markets as it showed that 374,000 jobs were added to private-sector payrolls in August, which was well below economists’ forecast of 613,000. Meanwhile, the Institute for Supply Management's (ISM) manufacturing employment sub-index for the U.S. fell to 49.0 in August from 52.9 in July, pointing to a contraction in job creation in the U.S. factory sector. The U.S. Bureau of Labor Statistics’ latest weekly jobless claims data showed that the four-week moving average of the U.S. jobless claims dropped to a pandemic low of 355,000 in the week ending August 28th. The Conference Board’s Consumer Confidence Survey revealed that consumers’ assessment of the labor market eased in August. 11.8% of respondents experienced difficulties in finding a job in the last reporting month (versus 11.1 percent a month earlier). At the same time, some 54.6 percent of respondents said jobs were plentiful (versus 55.2 percent a month earlier).

The U.S. economy is expected to add 750,000 jobs in August after 943,000 jobs added in July, while the unemployment rate is forecast to drop to 5.2% from 5.4% in the previous month.

FXStreet reports that economists at ANZ Bank expect the kiwi to see another leg higher with the next resistance seen at the 0.7170-mark.

“Generalised USD weakness ahead of key US jobs data (which has the potential to shift sentiment on surprises) played a role. That said, the kiwi has been one of the better performers and is approaching, or has broken, key levels on a number of crosses.” 

“The local Delta outbreak remains a key concern, but markets are doing their level best to look through it, and continue to take the view that there is still light at the end of the tunnel even with ~50 new cases a day.”

“The higher and steeper NZGB yield curve is also giving the NZD a bit of a tailwind.”

“Support 0.6800/0.6960 Resistance 0.7170/0.7215/0.7310.”

FXStreet reports that TD Securities’ economists are biased to further softening of USD.

“A 400K rise in payrolls would be strong by pre-COVID standards, but it would be well below the 900K+ readings in June and July. We don't think a 400K reading would be weak enough for Fed officials to back away from their ‘this year’ tapering signal, but it would probably increase the probability of a formal announcement coming at the December rather than the November meeting.”

“Our expectation for a below-consensus print is meaningful in our view, particularly since the USD continues to exhibit sensitivity to domestic data surprises — both in the absolute and relative sense. As such, we are biased for the USD to continue to soften.”

“We think EUR/USD has scope to rally marginally further following another breach of 1.1840 downtrend resistance; 1.1909 and 1.1975 will be the primary attractors to the topside.”

FXStreet reports that FX Strategists at UOB Group suggest that AUD/USD could now attempt a test of the 0.7480 level in the short-term horizon.

24-hour view: “We highlighted yesterday that AUD ‘could break 0.7390 but overbought conditions suggest it may not be able to maintain a foothold above this level’. Our view for a higher AUD was not wrong but it easily took out 0.7390 and rose to 0.7410 before settling on a firm note at 0.7403 (+0.47%). While still overbought, there is chance for the advance in AUD to rise towards the major resistance at 0.7430 first before a pullback can be expected. For today, a sustained rise above 0.7430 is unlikely.”

Next 1-3 weeks: “After AUD rose strongly on Wednesday, we highlighted yesterday (02 Sep, spot at 0.7370) that ‘boost in momentum is likely to lead to further AUD strength even though at this stage, it is premature to expect an advance to the August’s high near 0.7430’. Our view was not wrong even though we did not quite expect AUD to extend its advance so quickly (overnight high of 0.7410). While shorter-term conditions are overbought, a break of 0.7430 would not be surprising and would shift the focus to 0.7480.”

• Will also launch more futures contracts, including shipping futures
• Will accelerate to bring in overseas investors in domestic futures trading
• Will launch pilot schemes for intellectual property rights securitization

Markit/Caixin’s survey revealed on Friday that the activity in the Chinese services sector declined sharply in August, as growing coronavirus cases in Chana and abroad impacted operations and demand.

The Caixin/Markit services purchasing managers' index (PMI) came in at 46.7 last month on a seasonally adjusted basis, down from the previous month's reading of 54.9. That marked the first contraction in services activity since April 2020. The 50 mark divides contraction and expansion.

According to the survey, the new orders recorded the first fall in 16 months, while employment saw a decline for the second time in the past three months during August and the amount of outstanding business registered a second successive monthly increase. On the price front, input prices rose modestly overall, due mainly to higher staffing costs and increased transport fees, while output prices fell in August, following a solid gain in the previous month.

Caixin China Composite PMI, which covers both manufacturing and services, fell from 53.1 in July to a four-month high of 47.2 in August, pointing to the first contraction in private sector activity since April 2020.

The Australian Bureau of Statistics (ABS) reported Friday that Australia’s retail sales fell 2.7 percent m-o-m in July, following an unrevised 1.8 percent m-o-m drop in June. That was the largest monthly drop since December 2020.

Economists had forecast retail sales would decline 2.7 percent m-o-m in July.

According to the ABS, the biggest declines in retail turnover were registered in the industries, which were highly impacted by physical store closures, including cafes, restaurants and takeaway food services (-12.3 percent m-o-m), clothing, footwear and personal accessory retailing (-15.4 percent m-o-m), and department stores (-11. percent m-o-m). At the same time, food retailing (+2.3 percent m-o-m) recorded the largest advance as coronavirus restrictions kept households at home, limiting their mobility. Other retailing (+0.6 percent m-o-m) also rose, in part due to additional online sales.