JULY PAYROLLS RISE AT FASTEST PACE SINCE MARCH

Yesterday, the markets were calm after reports emerged that the United States and Chinese governments were restarting talks to avoid an escalating trade war. As a response, markets in Asia, Europe, and the US rallied. Today, the rally has eased as media reports said the US was likely to press on with its earlier-announced tariffs. If it goes on with the plans, the Trump administration will impose a 25% tariff on a wide range of Chinese products and services. The US market futures also calmed as traders waited for the Fed’s interest rates statement, which will come at 19:00 GMT.

The New Zealand dollar was little moved after the country’s statistics bureau released mixed employment numbers. The unemployment rate rose to 4.5% in the second quarter. This was higher than the first quarter’s 4.4%. On a positive note, the employment change in the second quarter was 0.5%, which was higher than the expected 0.4% while the labour cost index was unchanged at a YoY rate of 2.1%.

The pound was little changed against the dollar as traders waited for the BOE rate decision. The country’s Manufacturing PMI for July softened to 54. This was lower than the expected 54.2 and the June’s average PMI of 54.3. A rising PMI is considered a positive for the economy. In July, the country went through a difficult period as divisions inside Theresa May’s cabinet led to the resignation of key ministers, David Davis and Boris Johnson. Recent data also signal signs of weakness. This week, it was reported that auto manufacturing continued to decline after reaching a peak in July last year.

After reaching an intraweek high of 1.1743, the euro declined against the dollar as traders waited for today’s interest rate decision by the Fed. In this meeting, the Fed will not have a rate hike but their statement will be watched closely because it will likely make the case for more hikes. Traders expect the hike to come in September and another one in December. The US dollar too was little moved even after a positive jobs report from ADP. The numbers showed that private payrolls rose by 219K in July, which was higher than the expected 185K. On Friday, the official government numbers are expected to show the NFP at 193K.  

EUR/USD

Yesterday, the EUR/USD pair rose to a weekly high of 1.1743 where it found some resistance. Today. It fell to an intraday low of 1.1670. The pair’s movement was a classic cup and handle pattern as shown below. This means, there is a likelihood for the pair to continue moving up as it continues with the previous upside movements. However, the pattern could be broken today depending on the statement released by the Fed.

NZD/USD

On Thursday last week, the NZD/USD pair reached a peak of 0.6850. Then, it started declining, reaching a low of 0.6760 on Friday. This week, the pair moved up and down as traders interpret the data released from New Zealand. Today, the mixed jobs report led to a slight softening of the pair which is now trading at 0.6805. The pair has also formed a symmetrical triangular pattern as shown below. This is an indication that there will be more consolidation between the 0.6785 and the 0.6833 level.

GBP/USD

In the past two weeks, the GBP/USD pair has been on a slight upward trajectory. It has risen from a monthly low of 1.2955 to the current price of 1.3152. The pair has formed a symmetrical triangle, as traders wait for the statement from the BOE. Before the BOE makes its decision and provides forward guidance, the pair will continue to trade within this range and then it will break out in either direction.