SPOTLIGHT ON US DATA CONTINUES
Attention will remain on US economic data in the latter half of the week, with Thursday’s reports focused on jobs and manufacturing.
Investors can expect a somewhat active European session on Thursday, with IHS Markit reporting on manufacturing PMI for the UK, Germany, France, Italy, Greece and the broader euro area. The Eurozone manufacturing PMI is forecast to hold steady at 59.6 on a scale of 1-100 where 50 separates expansion from contraction.
The start of US trading will feature the weekly initial jobless claims report courtesy of the Department of Labor. The number of Americans filing for first-time unemployment benefits is forecast to rise by 5,000 to a seasonally adjusted 238,000. On Wednesday, payrolls processor ADP said US private sector employers added 234,000 workers last month, a figure that was well above forecasts.
Later in the morning, IHS Markit and the Institute for Supply Management (ISM) will each report on US manufacturing PMI. The ISM report, which is more closely followed by the financial market, is forecast to show a half point drop to 58.8.
Finally, the Department of Commerce will report on construction spending at 15:00 GMT. The December report is forecast to show expansion of 0.4%.
Earlier in the day, Caixin China reported a slightly better than expected reading of manufacturing PMI for the world’s second largest economy. The manufacturing purchasing managers’ index came in at 51.5 in January, unchanged from the previous month.
The report indicated: “The manufacturing industry had a good start to 2018. Going forward, we should keep a close eye on the stability of the demand side.”
Europe’s common currency has been rangebound all week long, as the prolonged dollar slide finally found a short-term bottom. The EUR/USD exchange rate was last seen trading at 1.2419 for a gain of 0.1%. The pair peaked at 1.2475 on Wednesday before reversing back down to the low 1.2400 range. EUR/USD faces immediate resistance at 1.2470, followed by 1.2500. On the downside, immediate support is located at 1.2390, followed by 1.2355.
Pound sterling is holding steady against the dollar, with cable trading around 1.4200. The pair was kept in check by an assertive US Federal Reserve, which indicated on Wednesday that interest rates may soon rise in response to faster inflation. The GBP/USD exchange rate faces near term support at 1.4120, the intraday low, with resistance up ahead at 1.4232.
The USD/CAD continues to hold steady above 1.2300 following a series of protracted drops in previous weeks. The pair remains highly sensitive to economic data and monetary policy, with the Canadian dollar gaining more competitive advantage thanks to a robust domestic economy. The US nonfarm payrolls report on Friday could be the pair’s next major trading catalyst.