02.09.2016 Daily Market Analysis

The US dollar (USD) on Thursday weakened to its lowest levels in two weeks as the market waits on today’s nonfarm payrolls data. While recently, the release of the report has been less than spectacular, today promises to be different. It will be the last piece of employment data ahead of the FOMC meeting later this month, and the figure will provide tangible clues on whether a September US rate hike is feasible or not.

While the dollar plunge can be attributed to profit taking in the market, weak data from the US did not help either. Unemployment claims came in at 263K, largely meeting expectations of 265K. Despite this, the ISM Manufacturing PMI data disappointed at 49.4, as the market expected a 52.0 reading. Month on month construction spending also disappointed at 0.0%, with the market expecting 0.6%.

One of the biggest gainers yesterday was the UK pound (GBP) which has now retraced about 23.6% of the post Brexit fall. Aside from a weak dollar, the GBP was also boosted by positive manufacturing data from the UK. At 53.3, the country’s Manufacturing PMI was better than the expected 49.1, as well as the previous 48.3. The pound has been very stable, with the UK releasing strong data lately, and the feeling is that a weak US employment report will see it surge to even newer heights.

 Despite weak data from the region, the Australian dollar (AUD) and the New Zealand dollar (NZD) also gained against the dollar, supported by positive news from China, their major trading partner. The Chinese manufacturing PMI came in at 50.4, versus the expected 49.9. The Canadian dollar (CAD), on the other hand, stayed stable despite falling oil prices, with the market waiting on the release of Canada’s Trade Balance later today. Aside from construction data from the UK, the market’s focus will be on the US as the Bureau of Labor Statistics releases August’s Nonfarm Employment Change, the Unemployment Rate as well as month on month Average Hourly Earnings.

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