An article published by Bloomberg News reported that the U.S. government stands poised for its first partial shutdown in 17 years at midnight tonight, after a weekend with no signs of negotiations or compromise from either the House or Senate to avert it. Republicans and Democrats in Congress say they don’t want a shutdown, though neither side is budging from their positions to avoid one. House Republicans want to delay President Barack Obama’s Affordable Care Act for a year and make other changes to the health law. The president and Democrats vow not to let that happen. Hanging in the balance are 800,000 federal workers who would be sent home tomorrow if Congress fails to pass a stopgap spending bill before funding expires tonight. Standard & Poor’s 500 Index futures slid and Asian stocks retreated on concerns of a shutdown. Another article by Bloomberg News reported that it’s becoming increasingly clear why Federal Reserve Chairman Ben S. Bernanke should have avoided linking the central bank’s policy decisions to specific unemployment rates. Bernanke said in June he expected the Fed would complete its bond buying when the jobless level was around 7 percent, and policy makers have pledged since December they won’t consider raising interest rates as long as it exceeds 6.5 percent. With a decline in August to 7.3 percent for the wrong reason — Americans giving up on finding work — Fed officials are being forced to shift their guideposts.
Employers probably added more jobs in September than the prior month and the U.S. jobless rate held at the lowest level since 2008, indicating progress in the labor market will help sustain growth, economists said before a report this week. Payrolls rose by 180,000 workers, the most since April, after a 169,000 gain the prior month, according to the median forecast of 60 economists surveyed by Bloomberg ahead of Labor Department figures due Oct. 4. Manufacturing grew in August at close to the fastest pace in two years, separate data may show.
It’s different this time. The four most dangerous words in markets, according to former U.S. Treasury Secretary Larry Summers. With Japan set to raise its sales tax for the first time since 1997, Prime Minister Shinzo Abe’s political future rides on a different outcome than last time — when the nation slid into a recession and the premier lost his job. To avoid a spending slump, Abe, 59, is poised to unveil a stimulus plan to counter the 3 percentage point bump in the sales levy.
Europe’s nascent economic recovery is too green to make any impact on the region’s jobs market yet, according to economists. Unemployment in the 17-nation euro area remained at a record high of 12.1 percent in August, according to the median estimate of 30 economists in a Bloomberg News survey. The European Union’s statistics office is due to publish the jobless numbers at 11 a.m. tomorrow in Luxembourg.
EUR/USD: The EUR/USD traded higher on Friday as political wrangling over the budget threatened a U.S. government shutdown and uncertainty over the future direction of Federal Reserve policy weighed on the greenback. Today, the pair was trading almost flat at 1.34951 at the time of writing as investors jumped on the sidelines awaiting some news and data to get visibility on the market. The events likely to affect the movement of the pair on the European session are; the German Retail Sales (MoM) (Forecast: 0.8% – Previous: -1.4%), the French PPI (MoM) (Forecast: 0.2% – Previous: 0.7%), the Italian PPI (MoM) (Forecast: 0.2% – Previous: 0.1%), the Spanish Current account, the Core CPI (YoY) in the Eurozone (Forecast: unchanged at 1.1%) and the Italian CPI (MoM) (Forecast: -0.1% – Previous: 0.4%). Later in the day, the U.S will release the Chicago PMI (Forecast: 54.0 – Previous: 53.0). Investors should remain prudent as sentiments remain fragile on the market. Ahead of the coming week, significant events likely to affect the markets are: Tuesday; the euro zone will publish data on the unemployment rate, while Spain and Italy will release data on manufacturing activity. Germany will release official data on the change in the number of people unemployed. While in the U.S., the Institute of Supply Management will produce a report on manufacturing activity. Wednesday; Spain will release official data on the change in the number of people unemployed. The ECB will announce its benchmark interest rate. The announcement will be followed by a press conference with President Mario Draghi. Later in the day, the U.S. will release the ADP report on nonfarm payrolls. Thursday; the euro zone will release data on retail sales, while Spain and Italy will release data on service sector activity. Markets in Germany will be closed for a national holiday. Later Thursday, the U.S. will release the weekly government report on initial jobless claims along with data on factory orders. Meanwhile, the ISM will produce a report on non-manufacturing activity. Friday; Germany will release data on producer price inflation, while the U.S. will release the report on nonfarm payrolls, the unemployment rate and average hourly earnings. Volatility is expected on the pair throughout the week. Investors should stay very cautious and wait for day to come on market to get visibility. Investors should also monitor the latest developments in Syria and political tension in the U.S regarding the budget for more visibility. The resistance level is at 1.36561 and the support level is at 1.33225 on the weekly chart.
AUD/USD: The AUD/USD slightly traded lower on Friday as growing fears over a looming U.S. government shutdown and ongoing uncertainty over the direction of U.S. monetary policy weighed on the pair. Concern that U.S. lawmakers will fail to arrange a budget deal preventing a government shutdown next week affected sentiments of risk-related assets. Today, the currency pair was trading flat at 0.93066 as investors are awaiting the latest news on the budget deal to get visibility. Congress must pass a short-term budget by midnight on today in order to avoid a government shutdown. Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare. Later this month, Congress will have to extend the U.S. debt ceiling which the U.S. Treasury Department has estimated will be reached by October 17. Other event likely to affect the pair today is the Chicago PMI in the U.S, which is forecast to improve to 54.0 from the previous reading of 53.0. A higher than expected reading should be taken as bullish for the USD, while a lower than expected reading should be taken as bearish for the USD. Ahead of the coming week, other significant events likely to affect the markets are: Tuesday; the RBA will announce its benchmark interest rate. The rate announcement will be accompanied by the bank’s rate statement. Australia will produce official data on retail sales. Elsewhere, China will release data on manufacturing activity, Australia’s largest trading partner. In the U.S., the Institute of Supply Management will produce a report on manufacturing activity. Wednesday; Australia will publish data on building approvals and the trade balance, the difference in value between imports and exports. On the other hand; the U.S. will release the ADP report on nonfarm payrolls. Thursdays; the U.S. will release the weekly government report on initial jobless claims along with data on factory orders. Meanwhile, the ISM will produce a report on non-manufacturing activity. Friday; The U.S. will round up the week with the closely watched government report on nonfarm payrolls, the unemployment rate and average hourly earnings. Here again volatility is expected on the pair this week. Investors should stay focus. The resistance level is at 0.94639 and the support level is at 0.91434.
