US hourly wages implies possible rate hike
Fundamental outlook US nonfarm payroll fell below expectations while the surge in average hourly wages points to a potential rate hike soon. Sentiments amongst large manufacturers in Japan grew before the October election. Spain is faces domestic chaos as the Catalonia Government proposes to be independent.
The US ISM manufacturing index rose to 60.8 in September, the highest recorded in six years. ISM services index rose to 59.8 in September, the highest recorded in two years.
US jobless claims for the week ended September 30 dropped to 260,000 versus 272,000 during the previous week. Trade deficits for August steadied at US$42.4 billion, matching forecast.
US non-farm payroll shrank 33,000 in September due to the recent Hurricane disaster. This was below positive consensus and lower than below 169,000 growth in August. Unemployment rate declined 4.2 per cent.
From the US payroll report, the average hourly wages figure rose by an annualised 2.9 per cent which spiked the two-year Treasury note yield to intraday high 1.52 per cent, its highest since 2008. Traders reckoned this as an inflation signal for a possible rate hike before year-end.
Japan’s quarterly Tankan report on large manufacturers ended September grew to 22, the best recorded in 10 years. Services offered by large manufacturers expanded 23 in the same periodic quarter, maintaining a steady growth.
Core consumer prices of Japan rose 0.6 per cent on a yearly basis in September. Consumer confidence grew 43.9 in a steady pace without much change from August.
Spain is facing an internal dilemma as Catalan has proposed a referendum to be independent, despite strong objections by the Spanish government. European Governments are worried that sentiments might spread to more regions should Spain make the national split.
German factory orders grew 3.6 per cent in August, the highest recorded in six months. Manufacturing index maintained good growth at 60.6 in September.
Markit reported that the UK manufacturing expanded at 55.9 in September, lower than 56.7. Construction PMI fell to 48.1 in September, the first in 13 months. Services index stayed strong at 53.6 in September after 53.2 in the previous month. Technical forecast US dollar/Japanese yen traded in small sideways around 113 level last week. We presumed this will continue until election is over on October 22. This week, the trend might drawdown and reach 111 support for correction. Resistance stayed robust at 113 level.
Euro/US dollar made small dip last week and supported at 1.1670 level. This week, we predict the trend might rebound in mixed sentiments as the movement might go from 1.165 to 1.19 region. Caution is advised in swinging trend as there could be fundamental changes in Spain.
British pound/US dollar fell last week as the dollar strengthened to counterbalance firm euro trend. This week, we foresee the trend will be supported at 1.293 in case of further decline. Market might rebound and trade from 1.295 to 1.325 range if bargainhunting emerges.
Disclaimer: This article is written for general information only. No liability by the writer, publisher or any third party involved in the distribution of this work. Dar Wong is a registered fund manager in Singapore with 28 years of global trading experiences. You may reach him at dar@ pwforex.com.