ISM may show a contraction
The data released in the US were generally decent and helped maintain good market sentiment. ADP showed an increase in private employment of 90k – slightly less than expected but still signaling that firms aren’t panicking (and slashing they payrolls in a rush). Chicago PMI meanwhile offered some ray of light ahead of the national ISM. While the activity index declined from 58,8 to 56,5 pts., it was still remarkably above expectations at 53 pts.
Nevertheless, despite somewhat upbeat Chicago PMI, the US national industrial activity doesn’t look good. Previously released regional indicators pointed to a sharp contraction in manufacturing and even combined with Chicago PMI they indicate the ISM may come out at around 46 pts., noticeably lower than currently expected (48,5 pts. vs. 50,9 pts. in July and 55,3 pts. in June). Should that happen bulls might find it hard to ignore macroeconomic outlook after ignoring the bearish Conference Board on Tuesday.
EURCHF – SNB silent, key data from Switzerland
EURCHF was a good sentiment measure on the forex as of late yet yesterday it tumbled even as general sentiment was rather bullish (equities advanced and a price of oil rose even as inventories in US increased). The reasoning behind the move was that the SNB was quiet yesterday after intervening (indirectly) or at least talking the CHF down on each of previous 3 Wednesdays. While such explanation may seem ridiculous when we talk about the three-figures decline, the truth is that the market looked for a profit-taking opportunity (we warned about it on Monday).
While over a medium term global conditions (and a possible return of fiscal issues in the euro zone to the surface) may have significant impact on the CHF, the data that are released today may set a short term direction for the franc. The Q2 GDP was in line with expectations but that doesn’t prove much, as the EURCHF was on average above 1,25 during that quarter and nearly 1,30 in the first (a strength of the currency impacts the economy with a lag). The PMI (3.30 ET, 9.30 CET, consensus 51 pts.) will be much more important, along with the CPI (6th September). A strong support for the current corrective movement is located slightly below 1,14.
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Przemysław Kwiecień PhD, Chief Economist |
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