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Fundamental Archives |
Written by Saxo Bank |
Sep 06 10 10:07 GMT
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Time To Reflect On Non Farm Payrolls
And welcome to Mundane Monday. With the US and Canada both out today for Labor Day holiday's the market will be understandably quiet as traders take the opportunity to absorb Friday's post NFP price action. Taking all this into account we should see little if any action at all today which very much fits my schedule given the lack of sleep over the weekend.
Most have already made their own conclusions about Friday's data, but from my end I struggle to interpret these numbers and more so agree with both the equity and FX market reactions. But then again who am I to argue with this market, rather instead look for opportunities as they develop on the back of what looks like some overstretched crosses.
Data on the day is practically non-existent, while the week ahead is littered with central bank meetings, kicked off tomorrow early in the European morning with the RBA rate decision. Following this we have the BOC on Tuesday, BoE on Thursday and Japanese party room votes later in the week.
Staying briefly on the antipodean theme, whispers are emerging in the market that a new (minority) government will likely be formed and announced in Australia tomorrow while hushed voices in corners are noting that the RBA may make an upward surprise move in the OCR. The latter however in my view is of little validity as previous rhetoric on the topic has suggested that the RBA is in wait and see mode. Nonetheless all this amount s to the AUDUSD maintaining its current bid tone and with the set up of recent price action the overall move still looks constructive for a potential test of 0.9230/80 on the back of tomorrow's announcements.
In Canada the picture is slightly different in that the market has all but entirely priced in a 25bp upside move to the OCR. This has already seen an exaggerated downside correction in the USDCAD with more downside still in the offing. Brief upside dalliances today are going to be met with good sized offers placed in and around 1.0430 and 1.0480 levels. But as noted above, it should remain all quiet on the western front in the absence of the Loonie army.
Moving slightly further afield, having returned from a weekend in Berlin, an interesting scenario was reignited in my mind regarding the overall health of the EU economy. Not that this is news to anyone (just a friendly reminder, as it was to me) but to give you an idea of where things could potentially go in the coming months, allow me to remind you that Berlin (yes folks just Berlin on its own) is currently in debt to the tune of EUR 87bn! How does this translate? In simple terms (or at least in my mind) I feel that Germany is the China of Europe…
All it will take (and this is only a matter of time) is for a slowdown in the German economy and the proverbial will be hitting the fan quick smart. All the fears (rationally founded) regarding the sovereign debt crisis will once again resurface and the double dip that everyone keeps talking about becomes a stark reality….
Food for thought folks on what is going to be an otherwise dull day. |
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