ADP Non-Farm Employment, US ISM Services PMI and Fed at centre stage
Today’s key highlight is the FOMC decision scheduled for 18:00 GMT, which is expected to reveal that the Fed will begin tightening its asset purchases of its monthly $120Bln bond program, as well as when it possibly will be pulling the taper trigger.
That said, the FOMC press conference is likely to be saturated with rhetoric centred around the speed of tapering, inflation and the timeline of rate hikes once tapering fully concludes. Any surprise rhetoric could fuel volatility in the forex arena as dollar strength adapts to the messages disseminated by the president of the Federal Reserve.
Should the taper timeline extend beyond the middle of next year, the number of expected rate hikes begins to inversely decline. Moreover, any downplaying of the severity of inflation could also hurt the dollar.
Nevertheless, this anticipated meeting is critical, and the dollar’s reaction to the comments emerging from the press conference could surpass those resulting even from a positive Friday NFP event.
That said, employment growth estimations from the ADP Non-Farm employment have come in stronger at 571K versus the 400K forecast, which sheds positive light on what to expect in Friday’s NFP report, given jobless claims continue to fall. This could provide an additional boost to the greenback, exacerbating the effect from an anticipated commencement of tapering. Let us hope they don’t disappoint again on Friday’s jobs report.
The US ISM Services PMI for October is also due today and may deliver upbeat readings especially after firmer ISM manufacturing data this Monday that passed. This may be another positive for the dollar heading into the FOMC meeting later.
The dollar index has dipped marginally beneath the 94.00 handle, while the euro is trading around the $1.1590 level and the pound the $1.3650 mark.
Euro gains seem limited as ECB President Lagarde continues to advocate against premature tightening, despite increasing risks that inflation may remain elevated, and as the dollar holds its resilience against the common currency. The UK reported stronger final services and composite PMI readings of 59.1 and 57.8 respectively but sterling continues to lag somewhat as uncertainty lingers ahead of tomorrow’s BoE decision, and whether the central bank will agree to raise interest rates.
Oil on back foot, kiwi surprises
WTI oil futures have slipped to $81.80 per barrel on the back of expectations that the oil cartel OPEC will have to do more in terms of supply. Latest news feeds suggest President Biden is applying pressure on the cartel and specifically the UAE to raise output.
The New Zealand dollar is the best performer today in the forex arena, after reporting much stronger than expected employment data. Despite a tick lower in the cost of labour, quarterly employment grew by 2.0%, greater than the estimation of 0.4%, which dropped the unemployment rate from the expectation of 3.9% to 3.4%. The kiwi is currently at $0.7140.
US Final Services PMI is out at 13:45, while at 14:00 GMT, the Services PMI reading, and monthly factory orders are to be delivered.
US crude oil inventories are planned for 14:30 GMT and it would be interesting to see the numbers, especially as the US may have to dig into its reserves should the UAE fail to increase global supply.
Then at 16:00 GMT, BoE Governor Bailey is speaking, while at 18:00 GMT, the FOMC decision and base rate will be delivered, followed by the FOMC press conference at 18:30 GMT.
