We would not pay so much attention on the published ISM Manufacturing data in the US on Wednesday (actual 56.3, previous 55.5). It is enough to see that the new orders component (in the context of ISM Manufacturing) dropped for the 4th month (actual 53.1 in August against 53.5 in July). Also, the Fed is not expecting “miracles” to happen in the domestic economy in the 2h10. The mentioned positive data can only be considered as a reason for a short-term correctional growth in S&P500 and WTI after a rather sharp fall in August. Of course, on FOREX this may carry risks to see a subsequent correction in EUR/USD towards a plunge in previous month.
We would pay far more attention on the ADP recruiting company’s report, which has unexpectedly (for the first time since January) indicated a contraction in the US employment by 10k working places. The majority of analysts were forecasting positive data in the context of this indicator. Also, we would emphasize the construction spending data which lost 1% in July (forecast -0.3%). In our opinion, before the end of September we will still get quite a few arguments in favor of business activity decline in the US. This will cause another testing of the 1040 support level on S&P500 and 70$-71.5$ on WTI.
In the current situation we prefer waiting for the publication of nonfarm payrolls on Friday and would not bet on anything in the meantime.
In addition, the recent releases of positive data in the US (Consumer confidence, ISM Manufacturing) can mean that the Fed, in the context of the September’s (21/09) and October’s (2-3/10) meetings will not announce the expansion of the QE program. This idea will support the US dollar.
ECB
The key event for FOREX participants on Thursday is undoubtedly the ECB’s meeting. Of course, all the attention is paid onto the press-conference with J.C.Trichet at 14:30 cet, where he will give an assessment of the current economic situation in Eurozone, as well as give comments on the monetary policy.
The main “bearish” risk for the EUR/USD pair concerns the idea that, on the one hand, Trichet might indicate that the ECB is more concerned with the downside risks in the Eurozone economy, rather than the inflation risks. On the other hand, euro may be under pressure if Trichet says that ECB has to be more active with repurchasing bonds in the context of the repurchase program launched in May, or announces about the prolonging of the stimulus measures package for the next year.
To remind, the Monday’s comments of the Bank of Japan regarding the increased uncertainty of a subsequent development of the US economy, have plunged the European and American stock indexes and WTI prices, as well as led to yen’s and dollar’s appreciation on FOREX.
Konstantin Bochkarev, currency strategist
of company Admiral Markets.
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