ECB minutes and FED Talk to Drive the EUR and USD

Daily Update - 5th October 2017

Yesterday’s Focus

• USD Fed's Yellen Speech, ISM Non-Manufacturing

Yesterday’s Explained

On Wednesday, ISM Non-Manufacturing data shed further light on the argument that Fed may have seen correctly that further hikes are warranted. The prices paid of the ISM survey showed a large jump that likely makes rate hikes an easier idea for the Fed to pass. The counter-argument to the strong ISM priced-paid data is that hurricanes are a likely distortion, but the index being at the highest level since 2012 and historically leading the Fed’s favorite inflation predictor, PCE place more weight on Friday’s NFP.

The U.S. Dollar weakened against a basket of currencies on Wednesday as investors positioned themselves ahead of Friday’s U.S. Non-Farm Payrolls report, while reacting to fresh economic data and a speech later in the session by Fed Chair Janet Yellen.

 

Today’s Focus

• ECB Monetary Policy Meeting Accounts
• USD Continuing Jobless Claims, Initial Jobless Claims

Today’s Market

Heading into Thursday, the EUR and GBP traders gear up for the ECB monetary policy meeting minutes due out later today, while the calendar offers second-liner data in the Swiss CPI and Eurozone retail PMI. Hence, attention turns towards the US jobless claims, trade balance and factory orders data for fresh trading opportunities. There’s very little out of the Eurozone this morning, with the markets likely to be looking ahead to this afternoon’s release of the ECB’s monetary policy meeting minutes, in search of clues on when the ECB will begin to taper the asset purchasing program and by how much. There may be disappointment in the minutes, which could weigh on the EUR through the afternoon, ECB members having voiced concern over the strength of the EUR and wanting to avoid any market response in advance of the actual event.

Across the Pond, it will be a more interesting afternoon with August trade and factory order figures scheduled for release together with the weekly jobless claims numbers. We will expect the stats to be Dollar positive through the day, though the direction of the Dollar will not just be dependent on the stats, with FOMC member’s Harker, Powell and Williams scheduled to speak through the day. Powell is in the race for the top spot at the FED, so any comments on policy will be of interest, particularly when considering the fact that the markets have labelled him as the dovish candidate.