The currency blog

Today is Labour Day in the US and in Canada which means very little work will be done anywhere.

Going back to Friday, the stripped out version of the non-farm payrolls figure produced much stronger numbers than had been anticipated. The market now feels that removing the seasonally volatile short-term Government hirings gives a much more relevant picture of the employment situation. Accordingly, August private payrolls were reported to have grown by 67,000 (against the consensus figure of 40,000) whilst the July number was revised up from the previously reported -131,000 to -54,000. Economists quickly concluded that, although the US economy continues to face problems ahead, and that the unemployment rate will likely remain stubbornly high, Friday’s employment report is an important step in the right direction, and should weaken the case for additional quantitative easing on the part of Federal Reserve.

Today’s subdued market is likely to set the tone for certainly the early part of the week with only a light amount of data scheduled and no policy changes anticipated at any of the 3 Central Bank meetings over the coming days. Following the additional easing measures decided upon at the emergency meeting on 30th August, the market expects the Bank of Japan to maintain its policy settings tomorrow morning. Market focus will continue to be on the seemingly inexorable appreciation of the Yen and what the government is going to do to try and suppress it. The Reserve Bank of Australia is also expected to maintain the status quo on rates given the unexpectedly low CPI figure for the 2nd Qtr of the year. For the BoE policy announcement, there is unlikely to be much to get excited about - the official UK interest rate and the levels of QE purchases will both be unaltered in September. The minutes of the meeting, to be published on 22 September are a different matter as there is a real possibility of the discussions revealing a three-way split on the Committee. All the debate will be between the external members of the Committee, with Andrew Sentance sticking to his guns on the need for higher rates, whilst the other three members, (David Miles, Adam Posen and Martin Weale) all possible advocates for the instigation of a 2nd round of easing.

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