Daily Analysis for Friday, Aug 3rd

Range Bound Market Ahead of US Job Report No changes in rates from the Bank of England as we and the market expected. The market is now focusing on the US job report tomorrow, where focus as always is on the change in nonfarm payrolls.

MAJOR HEADLINES – PREVIOUS SESSION

• SW PMI Survey (JUL) out at 60.5, while 60.1 expected, 60.3 prior.
• US MBA Mortgage Applications (JUL) out at -0.3%, while -3.6% prior.
• US Challenger Job Cuts YoY (JUL) out at 15.4%, while -17.0% prior.
• US ADP Employment Change (JUL) out at 48K, while 100K expected, 150K prior.
• US Pending Home Sales MoM (JUN) out at 5.0%, while -0.5% expected, -3.5% prior.
• US ISM Manufacturing (JUL) out at 53.8, while 55.0 expected, 56.0 prior.
• US ISM Prices Paid (JUL) out at 65.0, while 67.0 expected, 68.0 prior.
• US DOE U.S. Crude Oil Inventories (JUL) out at -6497K, while -1000K expected, -1103K prior.
• US Total Vehicle Sales (JUL) out at 15.5M, while 16.0M expected, 15.6M prior.
• US Domestic Vehicle Sales (JUL) out at 11.7M, while 12.2M expected, 11.8M prior.
• JN Net Stock/Bonds investment (JUL) out at –JPY291.1B/-JPY617.3B, while JPY236.5B/JPY495.8B prior (revised JPY239.3B/JPY494.8B)
• JN Monetary Base YoY (JUL) out at -2.3%, while -3.0% expected, -4.1% prior.

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THEMES TO WATCH – UPCOMING SESSION

Unchanged view from yesterday:

As we anticipated, the US PCE figures came out a tad softer than expectations, but we did not see the significant sell-off in the USD, which we had anticipated. In fixed income we saw higher treasuries as a response to the weak inflation figures sending yields lower, which usually also is reflected in a weaker USD. EURUSD was fairly range-bound yesterday, ranging from 1.3680-1.3727. The main story is still concerns in the markets theat the recent credit market turmoil and subprime concerns will spill over into the economy as several houses have reported that they also are seeing defaults in not so risky assets, adding incentives for the investors to reduce their risky positions. This is why we have seen the correction in carry trades and in riskier assets as credit spreads have widened.

For EURUSD, we expect some more sell-off in USD to send the pair higher - a test of 1.3770 within this week is not unlikely.

Focus point of today will be the US July ADP report (expected at 100K), which gives a proxy for the US non-farm figures released on Friday along with the US July job report, as well as the ISM indices for July. The Manufacturing index is expected to fall a tad to 55.3 from 56.0 and the Prices Paid is expected to drop to 67 from 68 prior, which will add support to our bearish USD-view.

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Overnight News Bullets

• NO Unemployment Rate (JUL) out at 2.1%, while 2.0% expected, 1.8% prior.

• EC Euro-Zone PPI MoM/YoY (JUN) out at 0.1%/2.3%, while 0.3%/2.3% expected, 0.3%/2.3% prior.
• UK Interest Rates (AUG) out at 5.75%, while 5.75% expected, 5.75% prior.
• ECB Interest Rates (AUG) out at 4.00%, while 4.00% expected, 4.00% prior.
• US Initial Jobless Claims (JUL) out at 307K, while 310K expected, 301K prior.
• US Continuing Claims (JUL) out at 2525K, while 2548K expected, 2545K prior.
• US Factory Orders (JUN) out at 0.6%, while 1.0% expected, -0.5% prior.
• US EIA Natural Gas Storage Change (JUL) out at 77, while 74 expected, 71 prior.
• AU AiG Performance of Services Index (JUL) out at 56.0, while 54.9 prior.
• AU TD Securities Inflation MoM/YoY (JUL) out at 0.6%/3.0%, while 0.2%/2.6% prior.
• SZ CPI MoM/YoY (JUL) out at -0.6%/0.7%, while -0.6%/0.7% expected, 0.1%/0.6% prior.
  

Market

• FX: JPY weaker, USD weaker on weak data. EUR stronger.

O/N Data Heat map:

EU	US	JP	UK	SZ	AU	CA	NZ	NO	SE	FR
-

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Calendar

Today's Highlights:

Time (GMT)	Region	Release	Consensus
08:30	UK	Official Reserves Changes (JUL)	Prior -$90M
09:00	EC	Euro-Zone Retail Sales MoM/YoY (JUN)	0.8% / 1.4%
12:30	US	Change in Nonfarm Payrolls (JUL)	127K
12:30	CA	Building Permits MoM (JUN)	-9.7%
12:30	US	Unemployment Rate (JUL)	4.5%
12:30	US	Change in Manufacturing Payrolls (JUL)	-15K
12:30	US	Average Hourly Earnings MoM/YoY (JUL)	0.3% / 3.8%
14:00	US	ISM Non-Manufacturing (JUL)	59.0
14:00	CA	Ivey Purchasing Managers Index (JUL)	57.5
17:00	US	Baker Hughes U.S. Rig Count (AUG)	Prior 1775

This and Next Week’s Highlights:

Date	Region	Release
5 Aug	NZ	Labor Cost Alle Wages Private Sector.
6 Aug	AU	ANZ Job Advertisements, Aig Performance of Construction Index.
6 Aug	JN	Leading Economic Index, Coincident Index, Official Reserve Assets.
6 Aug	NO	AKU Unemployment Rate.
6 Aug	UK	Industrial Production, Manufacturing Production, NIESR GDP Estimate, BRC July Retail Sales Monitor.
6 Aug	GE	Factory Orders.

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FX

Additional USD weakness

EUR	USD	JPY	GBP	CHF	AUD	CAD	NZD	NOK	SEK	PLN
+	-		+	+		+	-	+	+

FX Trading Strategies

Pair	Supp.	Resis.	Comments
GBPUSD	2.0180	2.0430	We believe the recent sell-off has been du to carry unwinding in GBPCHF and GBPJPY and the recent weak US figures, wrt. Inflation and labor market along with relatively strong figures from the GBP, especially the mortgage approvals, GBPUSD should move higher today.Buy break of 2.0379 bid, targeting 2.0450, stop offer at 2.0355.

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