22
Markets are witnessing relatively weak movements today, whether in European and American stock indices or in the currency market, as a state of anticipation prevails among investors awaiting developments in the US trade negotiations with its international partners . Slight gains were recorded in some currency pairs, such as the euro against the dollar (EUR/USD) and the pound sterling against the dollar (GBP/USD) , while the dollar declined against the Japanese yen and the Canadian dollar. These cautious movements come amid a critical wait for the European Central Bank’s interest rate decision tomorrow, Thursday , which may include a step towards a rate cut. In addition, markets are anticipating the release of official US labor market data on Friday , which will directly impact the US Federal Reserve’s monetary policy direction in the coming months.
First: US Labor Market – Unofficial ADP Reading (Disappointing)
- Statement: Private Sector Employment Change (ADP)
- Result: Only 37,000 jobs
- Forecast: 111,000 jobs
- Previous reading: 60,000 jobs
This reading is shocking to markets and reflects a sharp slowdown in private sector hiring. Although ADP data isn’t always an accurate indicator of the change in official nonfarm payrolls released on Friday, this sharp decline raises the possibility of a weak reading in the official jobs report as well. Markets are now awaiting Friday’s nonfarm payrolls (NFP) report as the primary determinant of the path of US interest rates going forward.
Second: Bank of Canada decision – unchanged
- Statement: Official Interest (Overnight Rate)
- Result: 2.75% (unchanged)
- Expectations: 2.75%
- Decision: To maintain the interest rate as it is, with a cautious approach amid a gradual economic slowdown.
Third: Services Purchasing Managers’ Index (PMI) – Europe and America
Eurozone:
- France: 48.9 (higher than expected 47.4)
- Italy: 53.2 (better than expected)
- Spain: 51.3 (below expected)
- Germany: 47.1 (close to expectations)
- Eurozone overall reading: 49.7 (above expectations 48.9)
These figures reflect a relative improvement in services activity within the eurozone, but it remains fragile, especially in Germany, which is experiencing a persistent contraction below the 50 mark.
Britain:
- Score: 50.9 (higher than expected)
US:
- ISM Services Index: 49.9 (below 52.0 expected)
- S&P Services Final: 53.7 (Higher than expected 52.3)
US data is mixed, with the ISM reading reflecting a contraction in the services sector, while the S&P reading indicates a relative improvement. These discrepancies increase uncertainty about the performance of the US economy.
Fourth: Australian data and weak growth
- Gross Domestic Product (GDP) for the quarter/quarter: 0.2%
- Forecast: 0.4%
- Previous reading: 0.6%
A clear slowdown in the Australian economy could increase the likelihood of an interest rate cut in the coming period.
Fifth: American productivity
- Productivity growth: 0.2% (matched expectations, but lower than the previous reading of 1.2%)
These data point to a decline in productivity growth, which could weaken the outlook for wage growth and labor costs.
Market Summary and Forecasts
- Stock and currency markets are awaiting official jobs data on Friday to confirm or deny signs of a slowdown.
- Today’s data encourages expectations that the Federal Reserve may begin cutting interest rates in September if negative indicators persist.
- The Bank of Canada’s decision to remain unchanged reflects a global cautious approach to monetary easing.
