Here are the latest developments in global markets:
- FOREX: Ahead of the all-important Nonfarm payrolls the dollar index, which gauges the greenback’s strength versus six major currencies hit a fresh two-week high of 95.36 early on Friday before it fell back to 95.24 (+0.08%). Dollar/yen was trading 0.05% higher on the day around 111.70, and is set to complete a green day after two consecutive negative sessions. Turning to the euro area, retail sales grew less than expected in June and July’s final services PMI readings also missed forecasts, sending euro/dollar lower to a new five-week low of 1.1558 before the pair edged up to 1.1575(-0.07%). Pound/dollar was also trading weak around the 1.30 key-level (-0.14%), weighed by dovish Brexit remarks from the BoE chief, Mark Carney. Disappointing UK Services PMI figures also added to the bearish sentiment. The antipodean currencies were mixed with aussie/dollar rising by 0.04% and kiwi/dollar falling by 0.31%. Moreover, dollar/loonie stood near its opening level, while dollar/yuan hit a fresh 14-month high as heightened US-China trade tensions continued to drag the yuan lower.
- STOCKS: European stocks were trading higher on Friday at 1030 GMT, erasing losses of the previous two days. The pan-European STOXX 600 and the blue-chip Euro STOXX 50 were up by 0.60% and 0.52% respectively. The German DAX 30 climbed by 0.52%, the British FTSE 100 jumped by 0.69% while the French CAC 40 rose by 0.37%. The Italian FTSE MIB advanced by 0.61%. In the US, futures tracking stock indices were in the red, pointing to a negative open.
- COMMODITIES: Oil prices were moving lower, with West Texas Intermediate (WTI) crude oil and Brent crude being down by 0.26% and 0.29% at $68.75/barrel and $73.17/barrel respectively. In precious metals, gold inched up to $1207.93/ounce to trade near its opening level after it posted a fresh 1-year low of $1,204 earlier in the day.
Day ahead: US nonfarm payrolls take centre stage; trade developments eyed
US nonfarm payrolls will be the big release of the day (1230 GMT) and dollar traders will be once again eyeing wage growth readings for direction as higher earnings could boost inflationary pressures and thus the Fed’s rate outlook, subsequently pushing the dollar higher; the opposite holds true as well. According to analysts, average earnings are expected to increase by 0.3% in July on a monthly basis, faster than June’s pace of 0.2%. Year-on-year though, the measure is anticipated to grow by 2.7% as in the previous month. The unemployment rate will be in focus as well, with forecasts suggesting that the US labor market has tightened even further, with the jobless rate projected to inch down from 4.0% to 3.9%. Regarding the employment change, the number of workers in non-farm sectors is anticipated to have risen by 190k compared to 213k seen previously. Should the data prove better-than-expected, especially on the wage front, increasing the odds for two more rate hikes this year, the greenback could extend this week’s gains. Alternatively, a significant miss in data could send the currency down.
Staying in the US, June trade stats will be gathering attention at 1230 GMT amid the latest threats from the US to increase its import tariffs on Chinese goods; the relevant deficit is predicted to widen to $46.5 billion, from May’s $43.1bn. In May, rising exports drove the US international trade deficit to the lowest in 19 months, though, the trade gap with China widened further. Another deterioration in June could potentially add fuel to Trump’s protectionist mindset. Meanwhile, Canada is scheduled to deliver its respective trade report at the same time.
Later in the day (at 1400 GMT), the US’ ISM non-manufacturing PMI for the month of July is projected to decline by 0.5 points to 58.6.
In oil markets, Baker Hughes will report the number of active rigs for oil drilling at 1700 GMT.
In terms of policymakers’ appearances, the UK Prime Minister, Theresa May, will be meeting the French President, Emanuel Macron, in an attempt to persuade the French leader to soften his stance on her Brexit plans at a time when fears over a no-Brexit deal are heading higher; the BoE chief, Mark Carney, said earlier on Friday that the risks of such an outcome are “uncomfortably high”.
On Saturday at 0245 GMT, foreign ministers from the Association of Southeast Asian Nations (ASEAN) and other countries such as Australia, China, Japan, India, New Zealand, South Korea, Russia and the United States will be holding a summit, where defence matters and trade issues related to the US protectionist rhetoric could dominate the agenda. Earlier at 0100 GMT, the Federal Reserve Bank of New York Executive Vice President Simon Potter will be speaking on monetary policy implementation before the 23rd EMEAP (Executives’ Meeting of East Asia-Pacific Central Banks) Governors’ meeting.
Developments in US-Turkish relations could be of interest in the subsequent days as tensions have escalated after the US imposed sanctions on two Turkish ministers over the trial of Andrew Brunson, an American pastor; a move that sent the Turkish lira to fresh record lows against the greenback. On Friday, though, the US Secretary of State Mike Pompeo and the Turkish Minister of Foreign Affairs Mevlut Cavusoglu agreed to continue efforts to resolve the dispute.