You are here: Home > articles > Forex > European Open Preview – Strong earnings growth lifts the dollar; trade in focus again
European Open Preview – Strong earnings growth lifts the dollar; trade in focus again
September 10, 2018 8:26 amVideo
Latest News
- China’s Q1 GDP growth next on the Asian calendar – Preview April 15, 2024
- Technical Analysis – Goldman Sachs stock gains on strong earnings April 15, 2024
- Trading Signals for ETH/USD (Ethereum) for April 15-17, 2024: buy above $3,125 (200 EMA – 2/8 Murray) April 15, 2024
- Analysis for EUR/USD on April 15th. Monday – a tough day for the euro April 15, 2024
- GBP/USD: trading plan for the US session on April 15th (analysis of morning deals) April 15, 2024
- EUR/USD: trading plan for the US session on April 15th (analysis of morning deals). Euro is at an impasse April 15, 2024
- GBP/USD: Will sterling hold steady against dollar? April 15, 2024
- Technical Analysis – USDJPY rallies to another fresh 34-year high April 15, 2024
- Will Netflix earnings take the share price closer to its record highs? – Stock Markets April 15, 2024
- EUR/USD. April 15th. Bulls panic and retreat from the market April 15, 2024
- GBP/USD. April 15th. The dollar gains confidence April 15, 2024
- Weekly forecast based on simplified wave analysis for GBP/USD, AUD/USD, USD/CHF, EUR/JPY, AUD/JPY, and the US Dollar Index April 15, 2024
- XM’s Heartfelt Ramadan Iftar Support April 15, 2024
- Weekly forecast based on simplified wave analysis of EUR/USD, USD/JPY, GBP/JPY, USD/CAD, NZD/USD, and Gold on April 15th April 15, 2024
- Technical Analysis – US 500 reverses towards 123.6% Fibonacci April 15, 2024
- Market Comment – Iranian attacks put markets on edge, but fallout limited April 15, 2024
- XM and Human Initiative Spread Hope to Flood Disaster Evacuees in Demak April 15, 2024
- Weekly Technical Outlook: 15/04/2024 – GBPUSD, USDJPY, AUDUSD April 15, 2024
- Forex forecast 04/15/2024: EUR/USD, GBP/USD,USD/CAD, USDX and Bitcoin from Sebastian Seliga April 15, 2024
- Weekly Technical Outlook – GBPUSD, USDJPY, AUDUSD April 15, 2024
Here are the latest developments in global markets:
Major movers: Dollar soars as wages pick up; Brexit optimism lifts pound
The dollar surged across the board on Friday, following the US employment report for August. Nonfarm payrolls clocked in at 201k, slightly more than the anticipated 191k, while last month’s print was revised a little lower to 147k. The unemployment rate held steady at 3.9%, missing the forecast for a downtick to 3.8%. What probably caught investors’ attention the most though, was the wages component of this report. Average hourly earnings accelerated to 2.9% in yearly terms, notably higher than the expected 2.7%, and reaching a cycle-high last seen in 2009.
Since wage growth is considered a precursor to higher inflation down the road, the pickup in earnings likely amplified speculation for a somewhat more aggressive rate-hike path by the Fed moving forward. Especially so because these data came on top of robust ISM PMIs last week, which painted a rosier picture for US economic growth in Q3. A quarter-point Fed rate increase is now fully priced in for the September 26 meeting, while the probability for a second one by year-end has risen to 70% from 63% before the jobs data, according to market-implied pricing derived from the Fed funds futures.
Meanwhile in Canada, the nation’s own employment data for August disappointed, with the unemployment rate rising by more than expected and the net change in employment dropping sharply and unexpectedly into negative territory. Combined with a strong US jobs report and no signs of meaningful progress in the US-Canada trade negotiations, dollar/loonie edged up on Friday and is also trading 0.22% higher on Monday.
In the UK, the pound ripped higher after the EU’s chief negotiator Michel Barnier was seen as softening his Brexit stance, noting he “is open” to discussing other backstop solutions for the Irish border issue – which is the main sticking point left. He added the EU is ready to “simplify” border checks at the UK-Irish border, fueling expectations that the negotiations may ultimately bear fruit as both sides have shifted to a more conciliatory tone lately. Sterling/dollar surged to briefly break above 1.3000 as the Brexit risk premium on the pound was trimmed, though the pair pared all its gains to close the day lower after the dollar surged on the back of strong wage data. The UK currency held onto its gains against the euro though, with euro/sterling ending the session notably lower.
Elsewhere, the Swedish krone traded higher versus the euro and the dollar, though not by much, as the country headed for a hung parliament following Sunday’s elections.
Day ahead: Key UK data out; eurozone’s Sentix and US consumer credit also due; trade in focus
Monday’s calendar features industrial and manufacturing output figures, as well as monthly GDP numbers out of the UK. Data on eurozone investor sentiment and US consumer credit are also due. Meanwhile, developments on global trade, predominantly the Sino-US spat, will be closely watched.
UK industrial and manufacturing output growth is anticipated to have eased on a monthly basis in July, though the annual pace of expansion for both is expected to remain steady at 1.1% and 1.5% correspondingly. Additionally, July’s trade data out of the nation are projected to show the relevant deficit widening a bit, while GDP growth for the same month is forecast to stand at 0.2% m/m, above June’s 0.1%. This would put the annual pace of growth at 1.4%, from 1.3% in June. All readings are due at 0830 GMT, though sterling is yet again anticipated to be most responsive to any Brexit headlines rather than to economic releases.
Eurozone’s Sentix index, gauging investor confidence, is expected to marginally weaken in September. The measure has been sensitive to rising trade tensions in the past.
Out of the US, consumer credit data for July will be hitting the markets at 1900 GMT.
On trade, a fresh round of US tariffs on $200 billion worth of Chinese imports may go into effect at any time, and perhaps with little warning. In the meantime, President Trump expressed readiness on Friday to levy tariffs on virtually all Chinese imports into the US. Developments will have ramifications for broader market sentiment. Also on trade, ongoing talks between the US and Canada on a new North American trade deal have yet to bear fruit.
Atlanta Fed President Raphael Bostic, a voting FOMC member in 2018, will be talking on the US economic outlook at 1400 GMT.
Lastly, a meeting between Russian President Vladimir Putin and Japanese PM Shinzo Abe may be of interest.
Technical Analysis: GBPUSD looking neutral in the short term
GBPUSD has been moving sideways in recent days. The RSI is hovering around the 50 neutral-perceived level, pointing to the absence of momentum in either direction, the upside or the downside.
Upbeat UK data later today or positive Brexit news are expected to boost the pair. Resistance to gains may take place around the current level of the 50-day moving average line at 1.2999, including the 1.30 round figure. Not far above lies the five-week high of 1.3042 from late August which may also act as a barrier to advances.
Disappointing figures or growing signs for a no-deal Brexit, are likely to exert pressure on GBPUSD. Support to losses may take place around the three-week low of 1.2784 hit on September 5, including the 1.28 handle. Steeper declines would increasingly bring into scope the fourteen-month low of 1.2661 from August 15.
Related Posts: