Intraday Market Thoughts

Fed Waiting for Better Data, China PMI Up Next

by Adam Button
Aug 1, 2013 0:08

The Federal Reserve left its statement little changed and gave no fresh hints about tapering. The dollar was generally weaker following the FOMC but not significantly. The Australian dollar hit fresh cycle lows and will be a focus of Asia-Pacific trading.

The FOMC statement indicated that growth had been slower than believed in the first half of 2013 but said it would pick up going forward. Officials also cautioned on inflation, something that could weigh against September tapering. Overall, the changes in the statement are unlikely to sway those hardened toward or against tapering but gains the gold and bond market suggest a slightly smaller chance of a Sept taper.

The main focus of the Fed and the market will continue to be economic data and there were three important data points in the lead-up to the FOMC announcement. ADP employment rose 200K in July compared to 180K expected, boosting the dollar to the highs of the day. The Chicago PMI was mostly overlooked but slipped to 52.3 compared to 54.0 expected.

The key release of the day was Q2 GDP but it featured benchmark revisions all the way back to 1929. The economy grew 1.7% in Q2, beating the 1.0% but first quarter growth was revised to 1.1% from 1.8%. The takeaway is that growth has been slow this year but could be accelerating however there were numerous caveats from the report on either side of the debate. Again, it adds to the focus on upcoming data.

The Australian dollar is stuck in a technical black hole and falling deeper. AUD/USD broke below 0.9000 to a fresh three-year low at 0.8927 in early Asia-Pacific trading. A series of second-tier releases from Australia may get some attention with the RBA so close but the main mover is the Chinese official manufacturing PMI at 0100 GMT. Expectations are for a 49.8 reading.

 In the latest Premium Insights, 2 new trades in AUDUSD and AUDJPY, with 2 new charts were added, after the long standing short in AUDUSD finally hit its final target. The RBA's recent steps to signal further Aussie weakness have been loduly received by the market. But care is urged in AUDUSD due to potential short-squeeze post-ISM and post NFP. AUDCAD is also in progress.  Full details are in the latest Premium Insights.
Act Exp Prev GMT
Chicago PMI
52.3 54.0 51.6 Jul 31 13:45
Markit Manufacturing PMI (JUL)
53.1 Aug 01 12:58
ISM Manufacturing PMI (JUL)
51.5 50.9 Aug 01 14:00
50.1 Aug 01 1:00
47.7 48.2 Aug 01 1:45
ADP Employment Change
200K 180K 198K Jul 31 12:15
GDP (Q2) [P]
1.7% 1.1% 1.1% Jul 31 12:30

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