The Week Ahead

Highlights

• Risk rebounds on improving global data
• The most recent risk rally faces a number of hurdles in the week ahead
• A Multitude of Interest Rate Announcements in the Week Ahead
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Market Outlook

JPY: heading for BoJ intervention?

Resilience in high yield and commodity currencies took us by surprise as demand for risk staged an early September comeback and US payrolls proved better than feared. However, with the outlook for the US not ceasing to cloud over (services ISM, new manufacturing orders) but Washington mulling tax breaks, demand for AUD and NOK will stay sensitive to incoming US data and broader appetite for risk.

Market Movers ahead

• There is little in the way of US events or data that can seriously be expected to move markets, partly because Monday is Labor Day.
• Can the German upswing continue despite the problems stateside? There is much speculation about this at present, so it will be worth keeping an eye on the figures for German manufacturing orders and output. The UK and Japanese central banks are holding rate-setting meetings, but we do not see either being particularly exciting.
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The US Non-farm employment data posted better than expected results and revisions to the markets delight. As a result, we saw improved risk appetite. Expectations were for an overall loss of over 100,000 jobs and an increase in the private sector by 42,000 jobs. The street was pleased to see the numbers come out at an overall loss of 54,000 jobs and increase in the private sector by 67,000.

FX Briefing

Highlights

• US economic data brighten up: improvement in ISM manufacturing and employment
• Australia and Switzerland post strong growth rates for H1
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Overview

A quiet week with very thin market conditions as summer holidays slowly end and we waited for August's US Non-Farm Payroll (a better than expected –54K). Equity indices rallied, most erasing the losses of the last two or three weeks, Jakarta (3164) to a new record and Malaysia (1,441) its best since January 2008's peak at 1,524. Currencies were mixed, yen (83.66) and Swiss francs (1.0065) originally in demand but reversing on Friday's numbers, the Singapore dollar setting a new record of 1.3419 per greenback as did EUR/CHF 1.2850.

Fundamental Outlook for US Dollar: Bullish

• US Dollar starts the week strong as Dow Jones tumbles push it to highs vs Euro
• Subsequent rebound in US S&P 500 weighs on the US Dollar
• FX Options and Futures data support the case for medium-term US Dollar strength
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