Intraday Market Thoughts

Onto ECB, ADP & Services ISM

by Patrik Urban
Sep 6, 2012 12:15

Australian unemployment rate fell but employment declined; Spain and Italy to request aid; BOE steady. Market focuses on the ECB rate decision and press conference, followed by the Aug ADP & Aug ISM non-manufacturing. For trading ideas ahead of todays ECB rate decision, ADP report, services ISM and tomorrows job number, see details below.

Australian labor market data were mixed as employment declined 8.8K in August from previous 11.7K growth but the unemployment level ticked lower to 5.1% from 5.2%. AUDUSD initially fell to 1.0166 but bounced sharply higher and the short covering rally that followed sent the pair to session highs around 1.0240.

MNI reports that Spain is prepared to request aid in early October as long as the attached conditions do not go beyond what the government is committed to. Meanwhile, FT reports that Italy could request ECB bond buying that would require hard reforms before the year end.

BOE left the official bank rate unchanged at 0.50% and did not announce any new easing as new QE approved during the July meeting is still going through the system.

The ECB will announce its minimum bid rate decision at 7:45 am EST. While most participants expect a 25 bps cut to 0.50% some media imply that a rate cut is not on the agenda today. The much awaited press conference follows 45 mins later.

The US session will start at 8:15 am ET with August ADP report that is expected to decline to 142K from previous 163K. Jobless claims that come 15 minutes later are seen lower at 369K from previous 374K will be completely overshadowed by the ECB press conference that begins at the same time. Because of yesterday's leaked details, market is firmly expecting open ended, unlimited and unsterilized bond buying.

ISM non-manufacturing is due at 10:00 am and it is seen marginally lower in August at 52.5 from previous 52.6. Mario Draghi's speech at 12:30 pm in Potsdam at the M100 media award is not likely to have a significant impact on the markets.

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