High Low High Low
EUR/USD 1.1205 1.1160 USD/ZAR 13.9825 13.8597
GBP/USD 1.5158 1.5127 GBP/ZAR 21.18 20.98
EUR/GBP 0.7400 0.7367 USD/RUB 67.88 64.84
USD/JPY 120.15 119.78 USD/ILS 3.9500 3.9120
GBP/CHF 1.4824 1.4777 S&P 500 1,933 1,922
GBP/AUD 2.1596 2.1461 Oil (Brent) 48.91 47.99

Later on today, labour market data is published in the United States for non-farm payrolls, probably the most important monthly macro-economic announcement. This without a doubt has been the single key data point that has captivated the interest of market participants and central bankers for the past year. Whether it will continue to have quite the same importance now that most of the targets the FOMC was waiting for have been achieved is an open question, perhaps going forward inflation numbers will take pride of place, presumably in time we will learn more from the prognostications of key US central bankers. One can only imagine that the most important thing at this point – given concerns about slowing global growth – is that the Fed will want to make sure they are not forced to react to an upsurge in inflation. Given where commodity prices are, there seems to be very little chance in the short term for runaway inflation gains


One could be forgiven for thinking there hasn’t been any other interesting macro data out this week, but that would be wrong. Here’s a quick summary of what we’ve seen…

  • Manufacturing activity in the US has slowed according to the ISM manufacturing index, with a reading lower than any since May 2013
  • Household spending in Japan has perked up very strongly beating economist forecasts by a wide margin, this represents the first spending gain in 3 months in Japan
  • Vehicle sales in the United States jumped at the fastest rate in over a decade
  • Japan’s quarterly Tankan survey was disappointing for large manufacturers, as business sentiment deteriorated for the first time in 3 quarters, coupled with some poor industrial production numbers, some traders have been speculating that the Q3 GDP number in Japan might be negative
  • South Korean inflation numbers have declined, but interestingly industrial production contrary to forecasts has grown.


This is just a sample, and my first take is that manufacturing activity is having a tough time of it in major economies, but consumers are coming to the fore. If consumers start to dominate then manufacturing activity will turn around, you can count on that. There will be some who look at the glass as half empty, but I choose to view it as half full. This has more of the feeling of a lull in global economic activity, but there is no question that economies like Brazil and China are a worry. If, however, American consumers step up as they have in the past we’ll soon forget about everything else.


I suppose the bottom line is, what does this all mean for currencies? My bigger picture view remains the same, although I have a much lower conviction level on the path that’s taken to achieve that view, than perhaps I did a week ago. I continue to believe that the US dollar will strengthen, but I expect the pound sterling to be softer in the coming months. The euro should fit somewhere in between. For today, I expect cautious currency markets – at least amongst the majors – as we wait for the big data in the United States.





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