News background and trading ideas for 07/12/2018

7 дек. 2018 г.

From the point of view of macroeconomic statistics, the main event of the day yesterday was the publication of the ADP report on the level of employment in the US private sector. The data unpleasantly surprised: with the forecast of +195, in fact, it was only +176K. For the dollar, this is generally a rather alarming call on the eve of the main event - a block of official data on the US labor market. Recall that the data includes not only NFP (the number of new jobs outside agriculture) but also data on unemployment and wage growth. Markets, as we do, expect good numbers. There are enough reasons for this, starting from the general shape of the US economy, ending with just the magnificent state of the labor market in the country.

We found out the interesting fact, which could be a base of exceeding the forecasts of wage growth. The thing is that after a period of conflict and confrontation with trade unions, strikes and other satellites of this kind of negotiations, Amazon raised its salaries to its employees. It would seem, well, one company raised the salary, what does the statistics for all the States. Amazon is the largest employer in the US, what’s the US, it is the biggest employer in the world (!). The number of staff under 600 000 people. So there is nothing extraordinary in the fact that the company's moves may have consequences throughout the country.

Why are the figures for the salary increase so important? They are relevant primarily because the Fed uses them as one of the main benchmarks in assessing inflation in the country. In light of recent talks in the market that the Fed is close to completing the rate hike cycle, a sharp wage increase will be perceived as an inflation signal and as a reason for further US Central Bank rate hikes. And this, in turn, will be quite a strong bullish signal for the dollar. So today we are looking not only at the numbers on the NFP but also on the statistics on wage growth in the United States.
Well, besides, the highlight event of yesterday was the OPEC meeting in Vienna. Recall that everyone expected from it an arrangement of the oil cut. Average estimates were in the area of 1 million b/d. In fact, nothing agreed yet, and today negotiations must go on. Oil has reacted negatively to this impact of OPEC. So far we continue to hold the oil pause position, waiting for the final outcome of the OPEC meeting.

Getting back to where we are now, we have to admit that data on Eurozone GDP could be interesting for the financial markets, although there are no reasons to expect much surprises there.

To our trading recommendations, generally, they are unchanged, but of course with allowance to statistics on the US labor market. On the eve of the publication of data, it is highly desirable to close all intraday positions in order not to play roulette. Just in case recall, we buy the pound, the Canadian dollar, and gold, as well as sell the dollar, oil and the Russian ruble.