Metals Surge, CHF Firms up Despite Weak Data; NFP is Next

Gold hits 1860, silver at 42.60s. Swiss employment drops significantly, UK construction PMI declined and Eurozone PPI increased. PIMCO's El-Erian sees ECB cutting rates. Market turns to US labor market data.

The employment level in Switzerland dropped significantly in the last quarter to 2.77M from 4.11M previously. Such a drop comes as a surprise especially because analysts expected an unchanged reading of 4.11M. Despite this alarmingly bad result, CHF continues to surge as EURCHF lost another 200+ points and reached as low as 1.1061.

UK construction PMI fell in August to 52.6 from 53.5 in July which is the lowest print since December 2010. Construction PMI has been decreasing steadily over the past five months.

Eurozone monthly PPI came out at 0.5% from a previous unchanged reading and reached 6.1% on annual basis in July. The highest growth came out of the energy component.

A noteworthy article was published by Bloomberg last night in which Mohamed El-Erian, the CEO of PIMCO, said that ECB will probably cut interest rates as the chance of a recession in the Eurozone has risen to 50%.

The New York session will bring the eagerly awaited labor market news. August Non Farm Payrolls are expected to drop to 74K from 117K in July and the unemployment rate is seen unchanged at 9.1%.

Wednesday's ADP report showed a somewhat lower print than anticipated (91K vs. 102K exp.) so the probability of a significant positive surprise is lower to some extent. It is important to keep in mind that the correlation between ADP and NFP is not high (slightly above 0.6) and that ADP report excludes government workers.

Average hourly earnings are seen growing at 2.2% on annual basis in August from 2.3% a month earlier.