ADP Report & FOMC in Focus

Daily Update - 1st November 2017

Yesterday’s Focus

• BOJ Interest Rate Decision, Outlook Report, Monetary Policy, Press Conference
• CAD Gross Domestic Product
• EUR Unemployment, Consumer Price Index, Gross Domestic Product

Yesterday’s Explained

The Bank of Japan kept monetary policy steady, despite efforts from its peers in the U.S. and Europe begin to wind down stimulus. The BoJ said in a statement that it is maintaining the short-term interest rate at minus 0.1% and the target for the 10-year government bond yield at zero percent. In an outlook report, the BOJ said it is maintaining its forecast for inflation to hit 2% in the fiscal year 2019/2020. But it now expects core consumer prices to grow 0.8% in the fiscal year 2017/2018, lower than the previous projection of 1.1%. Consumer prices are expected to be up by 1.8% in fiscal year 2018/2019, unchanged from the previous forecast.

Eurozone Q3 GDP decelerated to 0.6% quarter over quarter. The quarterly growth rate was in line with expectations, but with Q2 revised up to 0.7% quarter over quarter from 0.6% quarter over quarter, the slowdown was unexpected. There is no breakdown of the numbers yet and while the data confirms that the recovery remains on track, with the annual rate accelerating to 2.5% year over year from 2.3% year over year. Still, with the annual rate continuing to move up and surveys suggest further strong orders growth, the growth path remains very solid with robust job creation and a narrowing output gap that will also lead to rising inflation pressures going ahead.

Today’s Focus

• USD ADP Employment Change, ISM Manufacturing PMI, FED’s Monetary Policy, Interest Rate Decision
• GBP Markit Manufacturing PMI

Today’s Market

On Wednesday, US ADP Employment Change will be published it is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth followed by ISM Manufacturing PMI Manufacturing Index that shows business conditions in the US manufacturing sector It is a significant indicator of the overall economic condition in US. This will be highlighted by Monetary Policy and Interest Rate Decision The focus is on the December meeting when the Fed is likely to deliver its third and last rate hike for the year. So far, Yellen and her colleagues are not deterred by lower inflation and intend to proceed as usual. This November meeting provides them with an opportunity to give a hint if they may change their minds. Any expressions of concern about inflation could send the dollar lower, while confidence could send it higher.