Formax: Investors Cautious before Non-farm Eye on RBA Rate Decision

Published:2016-08-02 22:52:04

Monday (August 1st), the U.S. dollar inched higher, investors are waiting for the instruction of this week non-farm employment data. Euro rose to three-week highs versus the dollar after a series of euro zone positive manufacturing PMI data. Gold maintained at two-week highs, gaining support from cooled Fed rate hike expectation; U.S. crude tumbled about 4%, falling below $40, as worries of oversupply kept simmering.  

U.S. data released on Monday were overall worse than expected. Construction spending declined 0.6% to its lowest level since June 2015 after dipping 0.1% in May. ISM said its index of national factory activity slipped 0.6% to a reading of 52.6 last month. A reading less than analysts forecast for 53. Markit manufacturing PMI of last month was in line with expectation and initial value 52.9; the data in July was 51.3.

New York Fed President William Dudley said at an international central bankers conference in Bali on Monday that the Fed could hike rates before the November U.S. election if the economy and labor market improve quickly, but he urged caution on rate hikes.

U.S. Dallas Fed president Kaplan stroke a hawkish tone on Monday, but his words exerted limited influence. He pointed out that rate hike would quite likely to come in September if data were positive. Consumption in this year would be strong. Brexit had limited influences over U.S. economy growth.

EUR/USD fluctuated at three-week highs after Euro zone released a series of positive manufacturing PMI data. Italian bank crisis is still a hidden trouble to harm the euro. Germany July manufacturing PMI rose to a seasonally adjusted 53.9 in July from 53.7 in preceding month, analysts had expected to remain unchanged at 53.7; the final value in June was 54.5. The euro zone manufacturing PMI rose to 52.0 from 51.9 in the preceding months, analysts also expected to keep stable; the final value in June was 52.8.

Meanwhile, China Caixin manufacturing purchasing managers’ index, which covers a greater share of small-to-medium sized companies, rose to 50.6 last month, expanding for the first time in 17 months, far better than expected 48.8. However, affected by flood, the official manufacturing purchasing managers’ index fell to 49.9 in July from 50.0 a month earlier, the first contraction in five months.

Today the market focuses are: RBA will hold policy meeting and announce rate decision; UK July Markit manufacturing PMI index; U.S. June personal income and expenditure monthly rate, and annual rate of core personal consumption expenditure price index in June.