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Now that the Jackson Hole symposium is out of the way, the markets will be focusing on the US jobs data.
The ADP report will hit the wires on Wednesday, followed by US non-farm payrolls data on Friday. The current consensus is for 180’000 new nonfarm jobs to have been added in August, versus the solid 255’000 printed last month.
For yen traders, Japan’s latest employment data, retail trade and household spending for July will all be released on Tuesday 12:30am BST. The monetary game in Japan has become very challenging given that the Bank of Japan has gradually lost credibility and support from the market. While six months ago, weak macro news used to revive Bank of Japan doves in hope that the central bank would do more to revive the economy and generate inflation, nowadays, the market has lost its faith in the Bank of Japan’s efficiency to remedy the slowing activity in Japan. It appears that the negative rates have had the opposite effect on consumer appetite. Instead of enhancing spending, it pushed Japanese households to save more. As the returns on savings are too low, this means the final result is less spending and deeper deflation. LCG’s Senior Analyst Ipek Ozkardeskaya believes it’s time for the Bank of Japan to surprise the insatiable market, yet central bank governor Kuroda is running out of resources.
Thursday will see a flurry of manufacturing data releases from Asia, Europe and the US. The manufacturing data in China will be the focus of the Antipodeans and commodity traders mostly. A faster contraction in the Chinese manufacturing industry would cause additional pressure on the Australian dollar and the commodity complex. However, the trend in the US dollar is expected to remain centre stage and either enhance or temper the price movements before Friday’s critical NFP read.
Finally, the UK’s second-quarter GDP growth came in line with expectations at 0.6%, shifting the focus to the manufacturing and services PMI data for August due out towards the end of next week. While the market expects a narrower contraction in the UK’s manufacturing sector, the services industry will be in a greater focus. A further contraction in the UK’s services industry following the Brexit could weigh on sentiment and negatively impact the pound market. A significant disappointment could resend the pound below the 1.30 level against the US dollar.