It’s been quite a week for fundamental event driven traders, for the most part the market has not only delivered the expected policy decisions and news event predictions, but the trends have also ‘obeyed’ the predictions, with a few exceptions…
With the FOMC statement the clear policy directive, courtesy of Ben Bernanke and the Fed, was one of continuation; the target is 6.5% unemployment by way of the monthly $85 billion of monetary easing, that easing will continue aggressively until the target is reached. The mention of the word “taper” does not appear in the Fed’s lexicon, yet.
We’ve had an abundance of PMIs this week covering primarily manufacturing which were extremely positive in some instances, particularly the UK figures which outstripped the most optimistic of polls.
The only ‘fly in the concrete’ was the USA news on pending home sales and mortgage applications which could put a dent in the absurd house price inflation we’re currently witnessing in the States; house prices up by a staggering 4.3% per month in certain areas. Yes that’s per month, not a year on year figure.
The ECB, as expected, kept their base rate at 0.5% and Mario Draghi’s statement accompanying the decision failed to create the previous fireworks we’d observed during his previous press conferences, when the price of EUR/USD would experience wild fluctuations; crashing through resistance then support (or vice versa) during the length of his address.
USA jobs numbers
Unemployment claims, the weekly continuous number, in the USA fell to 326K from a predicted 345K, whilst the ADP number, often considered a herald for the NFP numbers despite its previous habits of adjusted down its previous month’s figures, came in at a positive 200K. ADP stating that 200K jobs had been created in the most recent month.
So all eyes now turn to the last key high impact news event of the week, the NFP number. In times gone past this news event would cause massive swings in the major USD currency pairs and many traders, particularly novice traders, would place their bets on a positive or negative outcome.
The prediction was for a relatively modest job creation number, last month’s jobs print was 195K, this month’s prediction is for 184K. It must be acknowledged that by most revered economists estimates the USA needs to create circa 285K new jobs each month to ‘expand’.
The number is a disappointing 162K new jobs created in the month of July with the unemployment level shrinking to 7.4%.