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Markets Look to US Non Farm Payrolls for Next Trend Move; Euro Falls Through 1.4250
Markets are trading sideways overnight, as investors are now firmly focused on today’s macro releases. The S & P 500 was lower by 1.2% even though we saw a better than expected ISM report yesterday, so we can see that traders are squaring positions ahead of the main even risk on Friday. The August ISM figures from the US far surpassed market expectations, and this is causing many to second guess the possibility of additional QE stimulus. Recent European PMI data has been weaker, so the US Dollar was higher overnight against most of the majors. Today, the attention will be directed toward the US Non Farm Payrolls data, with the consensus estimates calling for a rise of +80,000 new jobs with the unemployment rate holding at 9.1%. The EUR/USD has moved lower to 1.4230-1.4240 with the USD/JPY seeing a slight bump to 76.80-76.95. Markets did see some movement after a Reuters article was published, citing an anonymous source suggesting that some EU-IMF inspectors are unsure about Greece’s ability to maintain its asset privatization requirements. If this is actually the case, it would be an extreme Euro negative, as it would put the quarterly bailout installment for September in question. Other headlines referred to a member of the ECB Governing Council (Nowotny) who said that he does not see any credibility in the speculation that France’s AAA credit rating is in jeopardy. Macro data showed that Eurozone PMI missed market expectations, with flash estimates from Germany and France seeing downward revisions to 50.9 and 49.1. The August reading in Italy was even lower, coming in at 47.0. European composite PMI saw a revision to 49 from 49.7 previously. Data below the 50 level is indicative of contraction, so, unsurprisingly, risk assets were sold off after the releases. In Australia, the Prime Minister (Gillard) dismissed rumors that she will be resigning her post. She added that her current policy programs will remain in place and she has no intention to change any of her cabinet members. Australian retail sales figures showed a rise of 0.5% for July, which is a strong rebound from the previous month. Capex data from the second quarter was strong as well, coming in at +4.9%, which beat consensus estimates.
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