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Lighter market calendar this week, but interesting things taking place

  • Like the GBPJPY advancing aggressively ahead of the crucial events for the GBP. The reasons for the stronger pound might be unclear to some as the retail sales index turned out to be lower than expected. Some cite takeover plans, but the latest GBP losing streak probably just went too far. Nevertheless, this rally is to be tested tomorrow and Thursday, first by the manufacturing data, then by the Bank of England. While the Bank is far from rising rates just now, expectations regarding rhetoric are not as high as they were before the previous meeting when the market was eventually disappointed and the GBP suffered.
  • On equity markets, moods were decent as the trade data from China was mixed. The trade balance was higher which is a plus because that means a positive contribution to growth, but it was higher through lower imports amid weak exports, which is certainly not a preferred composition.
  • Data for August USA Labor market conditions index (LMCI):

Consensus: 1,5% m/m
Prior: 1,8 % m/m (revised from 1,1% m/m)

Labor Market Conditions Index is a measure showing how main 19 indicators analyzed by Fed impacted the developments on the labor market. The data for August surprised to consensus to the upside, showing also strong upward revision for July. Note that among indicators heavily weighted by Fed are unemployment rate, private payrolls, job openings (JOLTS) and wages growth. Such mix implies that actually the Friday report published by BLS is supportive for the US economy, regardless of weaker NFP.

Better than expected print is another point proving that all of the improvement that Fed wanted to see on the labor market has already happened. Thus proving that major obstacle against liftoff no longer exists. In the wake of such developments, September rates hike should no longer be seen as a long shot only.

Analyzing the LMCI data Fed often published either cumulative data or average monthly change for a given period. Taking only 2015 data into consideration, we note that index has improved on average by 1,33%, pointing towards expansion on the labor market.

  • As investors in US came from their extended weekend we could see a sentiment oriented at buying. All major sectors within S&P 500 index were advancing with the industrials, materials and technologicals leading the pack. We could see also major M&A deals being sealed. General Electric received approval from European Union to buy Alstom, which helped its share price to increase by about 3,5%. TECO Energy was the best performing company (gaining about 24%) within S&P 500 index as Canadian Emera announce the acquisition deal. Apple is going to hold its iPhone event tomorrow, market participants expects new iPhone (6s, 6s PLUS or 7?) being announced. We could also hear some details on Apple TV or iOS 9. Cupertino based company share price is advancing by over 2%.
  • Turkish lira has somewhat corrected its recent slump, gaining close to 0,8% vs. USD and coming much closer to 3,00. However risks are still skewed to the downside as geopolitical risk (Kurds and IS issues) as well as the repeat of general election or high inflation are going to put pressure on further appreciation.
  • Among G10 currencies the commodity bloc was outperforming today. All: AUD, NZD, NOK and CAD gained close to or over 1%. Market pretty much ignored weak Chinese import data, which could hint weaker commodities demand from China. Tomorrow we’re going to see major events for Canada and New Zealand as BoC and RBNZ are announcing their rates decisions.
  • On commodity markets, industrial metals gained while oil investors will need to wait longer on inventory data this week because of the holiday in the US on Monday.

Rich moment






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