Non-Farm payroll expected to dip back to trend under 200,000. After rising to a strong 222,000 in July, consensus expectations now favour mean-reversion into 178,000. Watch out for payrolls data at 1.30pm on 4th August. As always pay attention to the often dismissed unemployment numbers and any potential revision to last months NFP number. The market often gets caught up in headline NFP chasing creating sharp spikes or dips until due consideration is given to all factors bring sharp correction.
EUR/USD breaks above major resistance level at 1.1714. After climbing from the July 1.1325 lows on a weaker US dollar and more aggressive ECB, all eyes remain poised on this make or break level. Failure to hold above this two-and-a-half-year barrier will trigger a sharp bearish reversal from overbought conditions.
Timing pattern signals a probable top in equity markets. During the latest cyclical recovery since 2009, there have been several peak/drawdown periods in August. The largest one occurred beforehand, on 8th August 2008, which marked one of the final major peaks of the Global Financial Crisis. Ultimately, the peak out in seasonality marks the end of the shorter-term mid-summer rally.
Australia. We have seen the RBA keep rate rates at a record low maintaining its bullish stance on the economy. They are showing they will not let the global theme of rate hikes influence their stance as a Central Bank. They also commented on the strength of the currency and alluded to the fact that the weaker US$ has played a large part in the AUD/$ recent surge, but commented that they could accommodate further increase in the value of the Australian Dollar. This potentially increases the probability of finding fresh highs.
President Trump. It’s been another tough month for the President, his family dealings with Russia have brought investigation on his political and business affairs. Naturally, this brought scepticism on his reign as President with 62% of the population surveyed calling for impeachment. This has been reflected in the performance in the Dollar over the last month, where despite sound data across the board we have seen the “Trumpflation” trade unwound entirely with years lows being found against all major global economies. All eyes now rest on the success of his Tax Reform bill, having failed again with his replacement for Obamacare, it is clear the House is reluctant to pass anything he proposes that does not show absolute fiscal sense.
Written by Senior Lecturer, Ron William