· Non-Farm Payrolls August Preview: US dollar is waiting for good news
- Payroll expected to dip to 1.4 million from 1.763 million in July.
- Unemployment rate to drop to 9.8% from 10.2%.
- Dollar boosted by better than forecast August manufacturing ISM.
Initial jobless claims
Jobless claims are a third indicator where the standard correlation has faltered.
If we assume that NFP will rise as expected in August that would be four months of payroll gains accompanied by average initial claims of well over a million each week. Such would be a near impossibility in any prior economy.
Claims are expected to drop to 950,000 in the August 28 week, from 1.006 million previously. This would be just the second week below 1 million in the last six months. Continuing claims at estimated to fall to 14 million on August 21 from 14.535 in the prior week.
Conclusion and the dollar
The predictive correlations between ADP payrolls, PMI employment indexes and initial jobless claims with non-farm payrolls have fallen considerably since economic closures in March and April.
Overall US job hiring has continued at a strong pace for four months despite indicators that in normal labor markets would have pointed at a stall or contraction in job creation.
The US is experiencing an unusual two-tier labor market with continuing layoffs as some businesses, restaurants and small retail stores that depend on foot traffic, continue to fail and lay-off workers and the overall economy which is rapidly returning to normal.
Despite the five week decline in the dollar, the market appears to be reassessing the state of the US economy and responding to statistical improvements.
Tuesday’s August manufacturing PMI, 56 on at 54.5 forecast and the highest reading since November 2018 is an example. Just after the release the euro soared 1.2011, its highest in over two years but the surge was brief and unsustained with the united currency closing at 1.1912, below its open at 1.1936.
· Euro hits week low as dollar finds footing
The dollar’s bounce extended on Thursday, as investors trimmed bets against the greenback and sold the euro on concerns that the European Central Bank was worried about its rise.
The bounce has lifted the greenback about 1.3% above the 28-month low it hit against a basket of currencies on Tuesday.
For about a fortnight now the dollar has been fighting to hold the line after dropping 10% from a March peak. As traders start to temper stretched bets on the euro it could post its best week on the common currency in four months.
The euro EUR=EBS fell about 0.4% to a one-week low of $1.1797 in Asia after the Financial Times reported that several members of the ECB's governing council were concerned that the euro's rise could weigh on European growth.
A speech from ECB board member Isabel Schnabel at 1500 GMT will be closely watched for any comments on the currency.
The outlier was the yuan CNY=, which rose as far as 6.8250 per dollar in the onshore market in the wake of a survey showing a sustained recovery in China's services sector, which grew for a fourth straight month.
The yen slipped marginally to 106.33 per dollar.
Ahead on Thursday are purchasing managers index figures in Britain, Europe and the United States and markets are also awaiting U.S. jobs data at 1230 GMT.
U.S. payrolls figures are due Friday, with soft private jobs data on Wednesday pointing to possible disappointment of economists’ expectations for 14 million new hires in August.
· The Australian dollar has spiked nearly 30% since March, defying coronavirus and downturn
The Australian dollar has spiked some 28% since a year-to-date low in March. As the country fell into recession in the second quarter, however, analysts were mixed on where the currency is headed.
In March, the Aussie dollar fell to a year-to-date closing low of $0.5738 against the greenback as the coronavirus crisis intensified, and lockdown measures were triggered nationwide.
Defying the country’s weak economic outlook, the currency continued strengthening in the past few months. It briefly broke through the 0.74 mark this week, and reached a two-year peak, according to Reuters estimates. It has since fallen back to the 0.73 level.
Erik Nelson, currency strategist at Wells Fargo, is rather bullish on the Australian currency and expects it will “continue to grind higher.”
However, not everyone is bullish on the Aussie dollar’s outlook.
Against the backdrop of Australia’s weakening economy, Mayank Mishra, global macro strategist at Standard Chartered Bank, was slightly more cautious on the Australian dollar.
“The GDP print is just highlighting the fact that the recovery is going to take a while … the (Reserve Bank of Australia) is going to maintain easy policy for the foreseeable future,” he said, adding that the central bank’s signalling of more easing may weigh on the Australian dollar.
Data on Wednesday showed that Australia officially slipped into a recession. Gross domestic product fell at a record pace in the second quarter, shrinking 7% compared to a 0.3% decline in the previous quarter.
· U.S. CDC tells states to prep for COVID-19 vaccine distribution as soon as late October
The U.S. Centers for Disease Control and Prevention (CDC) has asked state public health officials to prepare to distribute a potential coronavirus vaccine to high-risk groups as soon as late October, documents published by the agency showed on Wednesday.
The timing of a vaccine has taken on political importance as U.S. President Donald Trump seeks re-election in November, after committing billions of federal dollars to develop a vaccine to prevent COVID-19, which has killed more than 180,000 Americans.
· Health experts sound the alarm on a possible new coronavirus wave this winter
Health experts are concerned about the potential for a new wave of Covid-19 infections over the winter period, identifying several factors that could lead to an increase in the rate of transmission.
It comes amid heightened fears that coronavirus cases will surge in the Northern Hemisphere when the seasons change, since respiratory illnesses tend to thrive during cooler weather conditions.
That’s partly because people tend to spend more time indoors clustered together in winter, with less ventilation and less personal space than in summer.
· TikTok reportedly forced to weigh new options for U.S. sale after China’s latest restrictions
A deal for TikTok’s U.S. business is facing new hurdles as Washington’s deadline for a sale approaches, putting the app in danger of facing an effective ban.
An announcement of a deal had been expected as soon as Tuesday, CNBC previously reported, but that day came and went with no news of a transaction. On Friday, Chinese officials introduced new restrictions on technology exports that could require Chinese approval for TikTok to sell its algorithm, which is part of the core value of the app.
As of Monday, Oracle and a joint bid from Microsoft and Walmart were the top contenders for the sale, but The Wall Street Journal reported late Tuesday that China’s new restrictions had complicated and extended the talks.
A deal with the algorithm had been expected to fall in the $20 billion to $30 billion range, sources previously told CNBC. That price would likely drop if the key technology could not be included.
· French economic recovery plan should create 160,000 jobs: PM
French Prime Minister Jean Castex said on Thursday he hoped the country’s 100 billion euro ($118.03 billion) economic recovery plan would create 160,000 jobs by 2021.
Speaking on RTL radio, he had earlier said the plan aimed at erasing the economic impact of the coronavirus crisis over two years as well as helping to avert widespread job losses.
· India bans 118 Chinese apps, including Tencent’s hit games, as border tensions flare up
India has banned 118 apps with links to China, citing national security risks. It comes against a backdrop of rising geopolitical tensions between the two nations.
Major gaming titles from companies including Tencent and NetEase were on the list, as well as apps from other Chinese technology giants like Baidu and Alibaba affiliate, Ant Group.
· China plans new policies to develop domestic semiconductor industry: Bloomberg
China is planning a set of new government policies to develop its domestic semiconductor industry and counter restrictions imposed by the administration of U.S. President Donald Trump, Bloomberg News reportedbloom.bg/31Rwwvm on Thursday.
The Chinese government is preparing broad support for so-called third-generation semiconductors for the five years through 2025, the report added, citing people with knowledge of the matter.
· China's services sector sustains recovery as hiring picks up: Caixin PMI
The recovery in China’s service sector activity extended into a fourth straight month in August, an industry survey showed on Thursday, with companies hiring more people for the first time since January.
The Caixin/Markit services Purchasing Managers’ Index (PMI) slipped to 54.0 from July’s 54.1, dipping for the second month after June’s decade high, but staying above the 50-mark that separates monthly growth from contraction.
The services sector, which accounts for about 60% of the economy and half of urban jobs, had been slower to return to growth initially than large manufacturers, but the recovery has gathered pace in recent months as COVID-19 restrictions on public gatherings lifted.
· BOJ's Kataoka urges bolder easing to battle deflation risk
The Bank of Japan must take bolder monetary easing steps to fight the heightening risk of deflation, board member Goushi Kataoka said on Thursday, warning of a darkening outlook for consumption and capital expenditure from the pandemic.
The BOJ must buy government bonds aggressively and make clear it is ready to cut interest rates further to ease the burden on households and firms, said Kataoka, among the most dovish in outlook of the policymakers in the nine-member board.
BOJ may need to take more steps to pump liquidity, says board member Katoaka
Bank of Japan board member Goushi Kataoka said on Thursday the central bank may need to take additional steps to pump liquidity to the economy, depending on how the coronavirus pandemic affects companies.
He also said there would be no change to the importance of coordinating fiscal and monetary policies to spur growth, regardless of who became the next prime minister.
· Oil prices hover around multi-week lows on demand worries
Oil prices were hovering around multi-week lows on Thursday as worries about falling U.S. gasoline demand and sluggish economic recovery from the COVID-19 pandemic dented sentiment.
U.S. West Texas Intermediate (WTI) crude CLc1 futures were up 4 cents, or 0.10%, at $41.55 a barrel by 0626 GMT. Brent crude LCOc1 dipped 1 cent, or 0.02%, to $44.42 a barrel.
Both benchmarks fell more than 2% on Wednesday, with WTI sliding to its lowest close in nearly four weeks and Brent at its weakest since Aug. 21.
U.S. gasoline demand last week fell to 8.78 million barrels per day (bpd) from 9.16 million bpd a week earlier.
Reference: FXStreet, CNBC, Reuters
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