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US Open Note – Downbeat ADP jobs data drive dollar lower; Wall Street opens higher



Global stocks have a good start to September

Global markets had a solid start to September, with European equities following their Asian rivals higher and crawling back towards their recent record highs despite fears of a growth slowdown, the troubling supply shortages, and the scarcity of qualified employees, which keep production costs elevated.

Of course, businesses can always raise margins and transfer the increased costs to consumers, making cost pressures less problematic as long as consumption remains solid and central banks are willing to stay broadly accommodative, cutting stimulus only gradually. Hence, buying the dip is still not a bad idea for stock markets.

Excluding materials, every single component in the pan-European STOXX 600 was trading in the green, as Wall Street kicked off the new month on the right foot.

Euro on the rise

Inflation has also become a hot topic in the Eurozone lately following the pickup in CPI price indices on Tuesday, which consequently caused some anxiety to ECB policymakers and raised calls for some asset purchase withdrawal in the pandemic-related PEPP program as soon as at the end of this year.

The news sent the German bond yields higher, though such an action would not amount to bond tapering in the form the Fed is planning to execute. Nevertheless, the euro resumed its positive momentum against the US dollar today, determined to breach the 1.1830 barrier and climb above yesterday’s highs.

In terms of data, final Markit PMI readings for August confirmed logistical problems are becoming more stubborn than previously expected in the euro area, while other data showed that the unemployment rate inched lower to 7.6% as expected.

ADP jobs data knock the dollar down

Meanwhile in the US, the private ADP employment survey, which is considered a proxy for the comprehensive nonfarm payrolls report, showed a growth of 374k, slightly stronger than the previous reading but disappointingly almost half of the 614k expansion analysts projected. The downbeat results sent negative signals about Friday’s eagerly awaited nonfarm payrolls report, pressing dollar/yen to a session low of 109.97 from 110.38 before the release. Pound/dollar surged back above the 20-day simple moving average to 1.3789 in the aftermath.

In commodity currencies, aussie/dollar extended its bullish run to a fresh two-week high of 0.7352, while dollar/loonie remained stuck around 1.2588.

The ISM Manufacturing PMI figure for August will be the next challenge for the dollar 14:00 GMT. The consensus is for a moderate slowdown, though should the figure dive deeper, the dollar could get another knock.

Atlanta Fed president Raphael Bostic will be the first to speak after Powell’s Jackson Hole speech later today at 16:00 GMT. Therefore, his comments could create some headlines.

OPEC meeting

Elsewhere, OPEC and its allies will hold a virtual meeting later today to discuss a potential 400k bpd increase in supply. Investors have already fully priced in that scenario, which is nothing more than a continuation of rolling back production cuts initially introduced to meet the slowdown underpinned by the Covid-19 crisis. WTI oil prices are trading negatively on the day at $67.97.

Gold continued to move sideways around $1,815.

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