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Dollar Weakens Mildly after ADP Miss, Yen Selloff Continues

Dollar weakens mildly in early US session after big ADP job data miss. But Swiss Franc and Yen remain the weaker ones. Euro and Sterling firm up mildly. But they are outshone by Aussie and Loonie for the moment. Overall movements in the currency markets are limited, except in some Yen crosses. Traders are still generally cautious, awaiting more economic data from the US later in the weak.

Technically, we’ll turn our focus to some Yen crosses first, as Dollar’s move might be half-hearted before non-farm payroll data. EUR/JPY is now eyeing 130.54 resistance. Decisive break there will suggest completion of corrective fall from 134.11 at 127.91. Outlook will be turned bullish for retesting 134.11. Similarly, firm break of 81.56 resistance in AUD/JPY will also suggest completion of correction from 85.78, and turn near term outlook bullish for retesting 85.78 high.

In Europe, at the time of writing, FTSE is up 0.84%. DAX is up 0.45%. CAC is up 1.49%. Germany 10-year yield is up 0.0129 at -0.368. Earlier in Asia, Nikkei rose 1.29%. Hong Kong HSI rose 0.58%. China Shanghai SSE rose 0.65%. Singapore Strait Times rose 1.07%. Japan 10-year JGB yield rose 0.0044 to 0.031.

US ADP jobs grew 374k only, downshift in recovery

US ADP employment grew only 374k in August, well below expectation of 650k. By company size, small businesses added 86k jobs, medium businesses added 149k, large businesses added 138k. By sector, goods-producing jobs grew 45k while service-providing jobs grew 329k.

“Our data, which represents all workers on a company’s payroll, has highlighted a downshift in the labor market recovery. We have seen a decline in new hires, following significant job growth from the first half of the year,” said Nela Richardson, chief economist, ADP.

“Despite the slowdown, job gains are approaching 4 million this year, yet still 7 million jobs short of pre-COVID-19 levels. Service providers continue to lead growth, although the Delta variant creates uncertainty for this sector. Job gains across company sizes grew in lockstep, with small businesses trailing a bit more than usual.”

ECB Stournaras: Recent jump in inflation is due to temporary factors

ECB Governing Council member, Bank of Greece Governor, Yannis Stournaras told Bloomberg, “according to most estimates, the recent jump in inflation is due to temporary factors related to various supply-side bottlenecks caused by the pandemic.”

“Wage developments and unit labor costs which determine the core of inflation do not show the same volatility as headline inflation,” he added. “On this evidence, I would advise caution regarding the course of inflation relative to our medium-term target.”

Eurozone unemployment rate dropped to 7.6% in July, EU down to 6.9%

Eurozone unemployment rate dropped to 7.6% in July, down from 7.8%, matched expectations. EU unemployment rate dropped to 6.9%, down from 7.1%. Compared with June 2021, the number of persons unemployed decreased by 430 000 in the EU and by 350 000 in the euro area.

Eurozone PMI manufacturing finalized at 61.4 in Aug, another month of buoyant production

Eurozone PMI Manufacturing was finalized at 61.4 in August, down from July’s 62.8. Markit said output and new orders sub-indices fell further from survey highs in March. Inflationary pressures eased, but remained substantial.

Looking at the member states, readings remained generally strong: Netherlands (65.8), Ireland (62.8), Germany (62.6), Austria (61.8), Italy (60.9), Spain (59.5), Greece (59.3), France (57.5).

Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturers reported another month of buoyant production in August, continuing the growth spurt into its fourteenth successive month. The overriding issue was again a lack of components, however, with suppliers either unable to produce enough parts or are facing a lack of shipping capacity to meet logistics demand.

“These supply issues were the primary cause of a shortfall of manufacturing production relative to orders of a magnitude not previously recorded by the survey, surpassing the 24-year record deficit seen in July.”

UK PMI manufacturing finalized at 60.3 in Aug, severe disruptions and material shortages eroded momentum

UK PMI Manufacturing was finalized at 60.3 in August, a tick down from July’s 60.4. Market said output growth slowdown exacerbated by input supply issues. Input cost and selling price inflation remained close to survey records.

Rob Dobson, Director at IHS Markit, said: “Severe disruptions to supply chains and raw material shortages eroded the growth momentum of UK manufacturing in August…. With all of these factors likely to persist for the foreseeable future, manufacturing could well see a further growth slowdown in the coming months…. The impact of supply issues is also feeding through to rapid price inflation… Business confidence remained elevated despite the widespread shortages as firms focused on the longer-term outlook and brought back furloughed workers.”

Australia GDP grew 0.7% qoq in Q2 better than expectation

Australia GDP grew 0.7% qoq in Q2, above expectation of 0.5% qoq. Over 2020-21, the economy grew 1.4%. Head of National Accounts at the ABS, Michael Smedes said: “Domestic demand drove growth of 0.7 per cent this quarter which saw continued growth across household sp