The negative performance of the US labor market is still weighing on the recovery in an unexpected increased pace as we have seen last Friday from the US labor report of September which has shown rising of the US unemployment rate to 9.8% from 9.7% in August and a bigger than expected number of lost jobs out of the farming sector reached to 263k and this number was widely expected to be around 175k. The negative number has affected badly on the US stocks driving Dow further below
9500 to close the week down by 177 points at 9487 in spite of the rebound which came after the jobs data. The Japanese yen and the greenback has been boosted up directly with the release of these dovish data but the market has managed to push them down later in the session in a wave of the investors' risk appetite rebound after 2 weeks of losing in the equities market. It looks as the Fed has repeated several times that the recovery of the labor market is to be in a gradual pace and keeping the easing steps of the fed on is essential until a crucial change in this weak performance of the labor market and the market believing in this can put weights on the stocks in the next period. In the recent fed's assessment, we have seen reference to a diminishing of the recession pressure but this was in a cautious way preferring keeping of all the taken easing steps in the same time waiting for a solider growth can trigger jobs asking as the economic conditions are still fragile and in need of the fed's reinforcement to store the market confidence in consuming and investing but this recovery has been hit last week by several weak data starting with the release of Sep US Broad Consumers confidence number which came back to 53.1 from 54 in August and it was expected to be 56.5 and US Sep ISM Manufacturing index which came down to 52,6 from 52.9 in August while the market was waiting for 54 and ending on the Friday with the release of weaker than expected demand of the US durable goods of August which declined broadly by 2.6%% m/m while the core figure declined by .3% and also we have had an unexpected drop of the US factory orders of August by .8% while the market was waiting for an increasing by 1.1% and surely, the persisting weakness data of the US labor market which we have aforementioned which can cause a second round of negative effect on the consuming and business confidence which are required for underpinning the recovery.The British pound has found recently some underpinning last week from the release of the CBI retail sales figure of September which came up in an unexpected way at 3 while the market was waiting for just -14 from -16 in August. The cable has found a support at 1.58 again. The cable has started last week as expected in a very dovish way after a weak closing below 1.60 reaching 1.577 before trying again to get above 1.61 underpinned by these data. The British pound was under pressure recently by Marvin King's comments in front of the parliamentary committee when he said that further deposit interest rate cut might be a useful supplement and his reference to the use of a weaker British pound for increasing the exports and getting out of this recession last and his dovish which could contain the current market sentiment pushing the British pound down in spite of the recent MPC minutes release which were much more optimistic than the market expectations and discounting showing that the MPC decision of this month of holding the buying bonds plan unchanged at 175 Bln Stg was unanimously this time with no opposing from king again.
By god's will, we wait today for the release of the services data of September. We wait EU PMI Services index to be 50.6 again as it was in August and UK to be 54.1 from 54.6 in August and also US non- manufacturing index to be 50 from 48.4 in August.
Best wishes
FX Consultant Walid Salah El Din E-Mail: snipped-for-privacy@fx-recommends.com