Caution prevails in Equity markets this morning. Uncertainty on Wall Street has spilled over to Asia, with most equities trading downwards. European markets have lifted higher, escaping the nerves spread by the US.
Central banks have been the focus of this week’s trading session. The US Federal Reserve, the Bank of England and the Bank of Japan have all kept interest rates unchanged, the rhetoric has been positive from the bank’s statements.
The US federal reserve is set to raise interest rates two to three times in 2017, the dollar is suffering under the possibility of higher interest rates. Additionally, the dollar has retreated under the pressure of Donald Trump’s fiscal policies. The US president is determined to discard multi-lateral trade agreements, in favour of bilateral trade deals. The uncertainty around the implications of Trump’s agenda is reflected in the depreciation of the greenback. The EURUSD is trading at $1.07.
The much anticipated – non-farm payrolls are released today. The preliminary ADP non-farm payrolls came in much higher than estimates, which indicates that the US employment data could surpass expectations.
Following the Federal Reserve’s interest rate decision, a large increase in this month’s non-farm payroll could give the Fed the blatant data needed to raise rates.
Investors welcomed back Chinese markets today, which were closed this week for a public holiday. China came back to the markets with some surprising news, raising short-term interest rates by 10bp. In an attempt to curtail a debt-infused economy, the Chinese central bank has increased interest rates to encourage debt-ridden companies to deleverage. However, the central bank risks stunting the Chinese economy – an economy that is already showing signs of a slow-down.
Forex on Pause
In the run-up to the non-farm payrolls, investors hold tight in anticipation. Leaving FX relatively untouched.
- GBPUSD at $1.25
- AUDUSD at $0.73
Conversely, yen is teetering. This unbalance is due to the Bank of Japan’s announcement that it would purchase an unlimited number of bonds at a fixed price today. USDJPY is weaker, trading at 113.12.
13:30 (GMT) US Non-farm payrolls
13:30 (GMT) US Unemployment rate
15:00 (GMT) ISM Non-Manufacturing PMI