ADP EMPLOYMENT NUMBERS, FED RATE DECISION IN THE SPOTLIGHT
A combination of economic data and monetary policy will dominate the headlines on Wednesday, kicking off a highly active second half of the week.
Action begins at 07:15 GMT with a slew of final Eurozone PMI reports for the month of June. Markit will release final manufacturing data for Italy, France, Spain, Germany, Eurozone and United Kingdom.
From there, investors turn their attention to North America where payrolls processor ADP will report on US private sector job creation. Private sector employers are forecast to have added 185,000 jobs last month following a net gain of 177,000 for June.
ADP numbers are considered an accurate gauge of the official nonfarm payrolls figures, which are due 48 hours later.
Markit and the Institute for Supply Management are also scheduled to report on US manufacturing PMI at 13:45 GMT and 14:00 GMT, respectively. Currency traders put more emphasis on the PMI report. The July edition is forecast to show a slight weakening in the manufacturing gauge, though overall trends remain solid.
In a separate report, the Commerce Department will report on construction spending at 14:00 GMT. Thirty minutes later, the US Energy Information Administration (EIA) will release weekly crude oil inventory data for the period ended 27 July.
On the policy front, the Federal Reserve will wrap up its two-day meeting in Washington on Wednesday with an official statement at 18:00 GMT. Members of the Federal Open Market Committee (FOMC) are widely expected to keep the federal funds rate locked at 2% until September. That being said, traders will be keeping close tabs on the official policy statement to gauge officials’ views of the economy and interest rates.
Europe’s common currency swung back below 1.1700 on Tuesday as the US dollar regained momentum against its peers. The EUR/USD exchange rate fell from a high near 1.1740 down to the 1.1680 handle, where it currently sits. Immediate support is located at 1.1621, the low from 27 July. Resistance is found up ahead at 1.1749, the high from 23 July.
Cable extended its rangebound trade on Tuesday, as markets searched for fresh trading catalysts. The GBP/USD pair continues to hold above the 1.3100 line, with immediate support located at 1.3070, which corresponds to the previous week’s low. On the opposite side of the spectrum, the first resistance test lies at 1.3151.
The North American cross showed some upside on Tuesday, but the rally was short-lived as prices fell back toward the 1.3000 handle. At the time of writing, the USD/CAD exchange rate is holding around 1.3018, little changed from the previous close. The Canadian dollar may have more upside in the intermediate future as NAFTA negotiations show signs of progress.