Daily Market Outlook, September 3rd, 2021

Overnight Headlines

The monthly US employment report is always a key release of the month, and is viewed as an important bellwether of economic conditions. However, this month’s report is likely to attract even more attention than usual. In recent comments, Fed policymakers have noted that a further improvement in the US labour market will be a crucial determinant of when it will start to rundown its asset purchase programme making today’s report particularly important. Indeed a number of them have explicitly linked their support for an early tapering to this report. While recent US data has seen some disappointments of late the labour market so far has continued to improve.

July saw a monthly rise in employment of 943k, the biggest in 12 months, and over the past two months, the rise has been close to 1.9 million. Employment is still well below pre-pandemic levels but with unfilled vacancies at around 10 million, the issue does not appear to be a lack of demand for workers. Expect the latest report to show another big jobs increase of 810k, albeit risks of a smaller gain have risen following the weaker-than-expected ADP report earlier this week, along with a further fall in the unemployment rate to 5.2%. That should be enough to convince markets that an announcement on tapering is in the near future. Furthermore, the wage data will be watched closely given reports that recruitment difficulties are forcing business to pay more.

July services PMI readings for the UK, France, Germany and the Eurozone as a whole, are final readings. Revisions are typically not that meaningful and it is likely that the surveys continue to show that rates of activity remain solid. For the UK, the first estimate fell compared to July with the services headline measure dropping to its lowest since February. Supply constraints were cited again as a key factor with recruitment difficulties in particular noted as an issue despite a big monthly rise in employment.

In the US, the services ISM report for August is expected to show a moderation following the surge in July. Supply chain issues, particularly from labour shortages, are likely to have weighed on activity and expect the headline measure to have dipped to 62.1 from 64.1 previously, though still at a level consistent with solid growth across the sector.

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

USDJPY - 113.00 1.22bn (c). 112.00 510m. 111.50/60 552m. 110.50/70 846m. 110.10/20 868m. 110.00 1.67bn (50/50 C/P). 109.80/90 527m. 109.60/70 762m. 109.50 509m. 108.90/109.00 869m.108.70/80 790m.
EURUSD - 1.2020 449m. 1.1980/1.2000 974m. 1.1890/1.1900 774m. 1.1870/80 2.09bn (1.68bn C). 1.1850/60 1.40bn (928m C). 1.1820/30 588m. 1.1800 803m. 1.1770/80 499m. 1.1750/60 854m. 1.1600 744m.
GBPUSD - 1.3800/20 1.21bn (1.08bn C).
AUDUSD - 0.7480/0.7500 647m. 0.7450/60 513m. 0.7390/0.7400 410m. 0.7370/80 923m. 0.7350 2.02bn (1.2bn P). 0.7330 719m. 0.7280/90 939m. 0.7250/60 510m.
NZDUSD - 0.7040/50 464m.
AUDNZD - 1.0400 401m.
USDCAD - 1.2550 1.66bn (1.62bn P). 1.2500 1.44bn (1.21bn P).
USDCHF - 0.9220 630m.
EURCHF - 1.0740 400m.
EURJPY - 129.70/80 452m.

EURUSD Bias: Bearish below 1.1850 Bullish above

GBPUSD Bias: Bearish below 1.3880 Bullish above.

USDJPY Bias: Bullish above 109 Bearish below

AUDUSD Bias: Bearish below 0.7320 Bullish above