The first on the table is the data on the manufacturing in the US. The ISM index has been on the rise since the beginning of this year climbing by nearly 12 points to 44,8 points in June. It is, however, still clearly below the 50 pts threshold which separates the US economy from expansion. The corresponding PMI indices from other major economies around the globe did already send optimistic message. The index for the eurozone buoyed by Germany unexpectedly grew to 46,3 pts. and Japanese and British PMIs are already above 50 pts even though in the early spring they were deep in the recession territory. If the US’s ISM (due at 16:00 CET) may deliver a similar leap, the first half of the week may and should bring a continuation of a bullish sentiment.
While the opening comes from the activity, the summary will be given by Friday’s payroll numbers. The consensus of a decrease in a non-farm employment at the 350k shows that the bar is set rather high. It might be worth to remind that this is the level noticed already in May which then came as a positive surprise. In June the number ballooned back to 467k but a consensus for July at 350k shows that investors treated May’s improvement as a step in a trend and June’s deterioration as a one-off deviation not the other way round. The thing is however, that we may witness a revival in a manufacturing for a quite a while without any positive impact on the labor market, so it might be the case that ISM is bullish and the payrolls not quite so.
As this will perhaps decide on which side of the psychological 1000 points (on S&P500 futures) barrier we will end up on Friday, major currency pairs look ready for bigger shifts again. The EURUSD last week failed to capitalize on the record US debt auction which resulted in a dynamic correction from 1,43 to 1,40 on Tuesday and Wednesday. This move was, however, swiftly negated by a rapid appreciation of the euro on Friday, interestingly with the dollar losing ground to the Japanese yen as well. The 1,43 did provide a resistance on the European opening on Monday but bullish PMI reading in the eurozone and the UK encouraged bulls to attack again. As for 14:00 CET the medium term resistance at 1,4336 held firm but should it be conquered the pair should be heading towards a high of 1,4720 recorded in December 2008. The situation on the pair will be crucial for the pound as well. The GBPUSD moved above a previous high 1,6740 and at 1,6876 it was the highest since mid-October 2008. A similar rise on the EURUSD would certainly help the cable to continue the trend.
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Przemysław Kwiecień  |
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