On Wednesday morning we could again observe a false optimism on the financial markets. This is now due to the publication of the better than forecast August PMI Manufacturing data in China. The indicator demonstrated a rise in the previous month to 51.7 against 51.2 a month earlier. An analogous index, calculated by HSBC/Markit Economics also advanced to 51.9 in August. Namely, such encouraging data explains an improvement of the risk appetite situation (Nikkei +1.17%, WTI +0.5%), and, as a consequence, depreciation of the US dollar on FOREX.
Everything would be fine if not the Chinese stock market which demonstrated a negative dynamics on September 1 (CSI -1.16%). It is also strange, but it seems that investors are forgetting about the upcoming publication of ADP/Macroeconomic Advisors Employment data at 14:15 cet and ISM Manufacturing at 16:00 cet. The mentioned data might stir speculation about the downturn in the world largest economy.
September futures for the price of the 10-Year US Treasury Notes (CBOT, daily graph).
Yield curve in the US (Federal funds futures, CBOT, %).
Despite the recent publication of somewhat “hawkish” protocol, expectations regarding the dynamics of federal funds rate in the following year did not change so much. It seems that everyone is waiting for the publication of the US nonfarm payrolls on Friday, so that we should expect to get some good trading action on September 3. It is possible that a rather rough Fed’s position in the context of the published “minutes” is connected with the fact that the US Fed already knows what kind of data comes from the labor market as well as from the other sectors of the regions’ economy.
Yield curve in Eurozone (3M Euribor, Eurex, %).
Same as before, while speaking about EUR/USD we are saying that one should at least wait for the press-conference of Jean-Claude Trichet on Thursday (14:30 cet), possibly also Nonfarm payrolls on Friday.
Yield curve in Great Britain (3M Sterling, %).
Konstantin Bochkarev, currency strategist
of company Admiral Markets.
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