01 Sep 2017

Market Brief: Nonfarm Payroll Day

Shaun Garrett

Dealing team

In the Eurozone everyone is waiting on tenterhooks for just when the ECB will make a tapering announcement.

Today's data release   Key levels
09.30 UK Manufacturing PMI Support Resistance
13.30 US Nonfarm Payrolls 1.2850 1.2980
13.30 US Unemployment rate 1.0825 1.0875
Market overview

In the Eurozone everyone is waiting on tender hooks for just when the ECB will make a tapering announcement. Yesterday’s Eurozone inflation figures witnessed a slightly firmer than expected reading of headline HICP in August, with inflation strengthening to 1.5% (y/y) from 1.3%, consensus had been for a print of 1.4%. Meanwhile ‘core’ inflation (ex food, energy, alcohol and tobacco) remained steady, as expected at 1.2%. With next week’s ECB meeting looming large these figures had been highly anticipated, although yesterday’s readings do not change our view that the ECB will hold off a QE tapering announcement until its October Governing Council meeting.

The progress of Brexit negotiations in the UK appears to be making little progress in the right direction. International Trade Secretary Liam Fox stated overnight in Japan that the UK must not allow itself to be blackmailed. EU negotiator Michel Barnier said there had been little progress on key issues, and trade talks were "quite far" away. Talks between the UK and EU have stalled over the failure to agree the UK's so-called divorce bill. The UK wants to begin trade talks and discuss the future relationship between Britain and the EU as soon as possible, saying it would benefit both sides. However, Brussels insists that discussions about the future relationship can begin only once "sufficient progress" on the "divorce fee", citizens' rights, and the border between Northern Ireland and the Irish Republic.

The day ahead

We reach the critical point of the week today on what is the first day of a new month. At 1.30 today the Nonfarm payrolls are due for release which as always is widely anticipated by the markets. Market expectations are for jobs growth of 180k however the Investec expectation is for a figure of 200k. As always on Nonfarm payroll day, we are expecting some volatility. At 9.30 this morning the UK Manufacturing PMI is due for release.

Thought of the day

There was much hype about the transfer deadline day yesterday, but in the end, a number of the big deals fell through. Despite this, the days spending reached a record off £210m breaking last year’s £155m mark. While there are no transfer deadline days in FX markets (which is unfortunate given the amount of banter on the FX desk yesterday around Chelsea’s failed bid to land Everton’s Ross Barkley for instance), there are always opportunities to break records. A big record to keep an eye on is GBPEUR’s all-time low of 1.02, reached in 2008. With the rate having once peaked at 1.7590, it now lingers in the 1.08 region, ever so close to 1.02. We all have our views on whether this level or even parity will trade. Please speak to your Investec dealer today, for their thoughts on this and of course Ross Barkley’s decision to turn down playing for the Premier League Champions!

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