Dollar Stronger on ADP, Stocks Fall and Yields Rise, Euro Fall

The markets are in risk mode again today, as the yields of the world’s major treasures are trading higher. Stronger-than-expected ADP employment data provides little support for the excess sentiment. The yen leads the way, followed by the dollar and the Swiss franc. On the other hand, despite the expected rate hike by the RBNZ, the New Zealand dollar is leading commodity currencies lower. The euro is also weak overall, under pressure from the dollar, yen and other European majors.

Technically, the EUR / USD decline resumes breaking a temporary low of 1.1561. EUR / CHF hits a low at 1.0712 and is set to retest its low of 1.0694. The EUR / GBP breakout of 0.8499 support should also pave the way for a retest of the 0.8448 low. The focus is now on EUR / AUD’s ability to hold below 1.5898 structural support to indicate a near-term bearish reversal.

In Europe, as of this writing, the FTSE is down -1.51%. The DAX is down -1.70%. The ACC is down -1.83%. The German 10-year rate is up 0.005 to -0.179. Earlier in Asia, the Nikkei fell -1.05%. Hong Kong’s HSI fell -0.57%. Singapore Strait Times rose 0.51%. The Japanese 10-year JGB yield rose from 0.0275 to 0.085.

ADP employment in the United States increased by 568,000 in September, recovery continues to progress

Employment in the US private sector ADP increased by 568,000 in September, above expectations of 475,000. By company size, small companies created 63,000 jobs, medium-sized companies 115,000 and large companies 390,000. By sector, goods-producing jobs increased by 102,000 and service jobs increased by 466,000.

“The labor market recovery continues to progress despite a sharp slowdown from 748,000 jobs in the second quarter,” said Nela Richardson, chief economist of ADP. “Leisure and hospitality remain one of the main beneficiaries of the recovery, but hiring is still strongly impacted by the trajectory of the pandemic, especially for small businesses. Current bottlenecks in hiring are expected to ease as health conditions related to the COVID-19 variant continue to improve, paving the way for solid job gains in the coming months. “

Eurozone retail sales grew 0.3% mo in August, EU up 0.3% mo

Eurozone retail sales rose 0.3% mo in August, well below expectations of 0.8% mo. Retail trade volume increased 1.8% for non-food products, while it declined 0.1% for automotive fuels and 1.7% for food, beverages and tobacco .

EU retail sales grew 0.3% month-on-month. Among the Member States for which data are available, the highest monthly increases in total retail trade were recorded in Malta (+ 2.7%), Ireland (+ 2.5%) and Slovakia (+2 , 0%). The largest decreases were observed in Denmark (-1.4%), Estonia and France (-1.2% each).

UK PMI construction slumped to 52.6, serious slowdown

UK Construction PMI fell to 52.6 in September from 55.2 in August, a missed expectation of 53.9. Markit said production growth slowed for the third month in a row. Subcontracting costs have increased at a record rate. Widespread supply shortages have resulted in rapid inflation of costs.

Tim Moore, Director of IHS Markit, said: “Data for September highlighted a serious loss of momentum for the construction industry, as labor shortages and the crisis in the supply chain. supply have combined to disrupt on-site activity. The volatile price and supply environment began to hamper the creation of new businesses… The shortage of building materials and the lack of transport capacity led to a further rapid increase in purchase prices… Measured globally, Prices charged by subcontractors have increased at the fastest rate since the investigation began in April 1997.

BoJ Kuroda: No pressing need for companies to raise wages and selling prices

BoJ Governor Haruhiko Kuroda said in a speech that the Japanese economy had “recovered”, driven by exports and the manufacturing sector. “If Japan can both protect public health and improve consumer activities through the use of vaccination certificates, for example, the trend of economic recovery is very likely to accelerate, even in the services, also supported by the materialization of pent-up demand. ,” he added.

Regarding the contrasting development of the CPI against the United States, Kuroda said demand in Japan “has not recovered as quickly as in the United States”. In addition, “many Japanese companies have essentially maintained their workforce, the supply side constraints in Japan have not been as severe as in the United States, and there has been no urgent need for companies to increase wages and selling prices “.

RBNZ increases OCR to 0.50% and maintains hawkish bias

The RBNZ raised the official exchange rate by 25 basis points to 0.50% as widely expected, because “it is appropriate to continue to reduce the level of monetary stimulus in order to keep inflation low and to support maximum sustainable employment. “. He maintains a hawkish bias and said: “Further removal of monetary policy stimulus is expected over time, with future moves contingent on medium-term inflation and employment prospects.”

In the attached statement, it is noted that the current restrictions related to COVID-19 “have not significantly changed the medium-term outlook” for inflation and employment. The pressures on capacity “remain evident” and economic data has pointed out that the economy “has performed well overall”. The headline CPI is expected to exceed 4% in the short term before returning to the target midpoint of 2% in the medium term.

Learn more about RBNZ:

Mid-day EUR / USD outlook

Daily Pivots: (S1) 1.1579; (P) 1.1600; (R1) 1.1620; Following…

EUR / USD decline resumes breaking temporary low of 1.1561. The breaking of the channel support also indicates a downward acceleration. The intraday bias is back on the downside and a deeper drop would be seen to the mid-term Fibonacci level of 1.1289. On the upside, a breakout of the resistance of 1.1639 is needed to indicate a near-term low. Otherwise, the outlook will remain bearish in the event of a recovery.

Overall, a sustained breakout of 1.1602 will support the rise of 1.0635 (2020 low) ended at 1.2348. A deeper drop would be seen at 61.8% retracement from 1.0635 to 1.2348 to 1.1289. Also note that the rejection by the 55-week EMA (1.1830) also has a medium-term bearish implication. A firm break of 1.1289 will pave the way for a retest of the 1.0635 low. On the upside, however, the breakout of resistance at 1.1908 will rekindle the medium term uptrend and bring attention back to a high of 1.2348.

Update of economic indicators

GMT Ccy Events Real Forecast Previous amended
01:00 NZD RBNZ rate decision 0.50% 0.50% 0.25%
01:00 NZD RBNZ rate statement
06:00 EUR Germany Factory orders M / M August -7.70% -1.50% 3.40%
8:30 a.m. GBP Construction PMI sept. 52.6 53.9 55.2
9:00 a.m. EUR Euro zone retail sales M / M August 0.30% 0.80% -2.30% -2.60%
12:15 USD ADP job change Sep 568K 475K 374K
2:30 p.m. USD Crude Oil Inventories 0.8M 4.6 million


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