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British pound calm ahead of UK jobs reportThe British pound is drifting on Monday. GBP/USD is trading at 1.2768 early in the North American session, up 0.08% on the day. The UK releases the employment report for the three months to June and we could see signs of a cooling labour market. Annualized average earnings including bonuses, which has hovered between 5.5%-6% all year, is expected to fall sharply to 4.6%. The previous reading came in at 5.7%, the lowest since September 2022. The unemployment rate has remained unchanged at 4.4% for the past two readings, the highest since September 2021. Unemployment is expected to nudge up to 4.5% in the three months to June. This would signal that the labor market is weakening and would make If wage growth declines and the unemployment rate rises in tomorrow’s report, it would support the case for the Bank of England delivering another rate cut, perhaps as soon as next month. The BoE meets on September 19, just one day after the Federal Reserve is widely expected to cut rates by at least a quarter-point. The BoE joined the central bank trend of cutting rates earlier this month when it lowered rates by a quarter-point to 5%. We have entered a new phase of the central bank cycle, with most of the major central banks having already lowered rates. The Federal Reserve will almost certainly lower rates at the September meeting, but by how much? Just one month ago, the markets had priced in a quarter-point cut at 90%, according to the CME’s FedWatch, but then the US posted some weak numbers and the financial markets sank. This has boosted the likelihood of a half-point cut, which on Friday was around a 50/50 split with a quarter-point cut. Still, not everybody who has a say is urging a rate cut. Fed Governor Michelle Bowman, a voting member on the FOMC, said on Friday that she is hesitant about cutting rates, since inflation is “uncomfortably above” the 2% target and the labor market remains strong. GBP/USD is testing resistance at 1.2779. Above, there is resistance at 1.2801 1.2753 was tested in support earlier. The next support level is 1.2731
by OANDA
NZD/USD slides on China's soft trade numbersThe New Zealand dollar has declined by 1% on Tuesday. In the North American session, NZD/USD is trading at 0.6044, down 1.01%. Earlier, NZD/USD touched a low of 0.6034, its lowest level since June 8th. China's post-Covid recovery has not gone according to plan, as weak global demand and soft domestic demand have weighed on economic activity. This message was reiterated on Tuesday as China posted disappointing trade data in July. Exports fell by 14.5%, worse than the 12.4% decline in June and the consensus estimate of -12.5%. It was a similar story for imports, which declined by 12.4%, down from -6.8% and below the estimate of -5%. The weak trade numbers from the number two economy in the world are dismal news for the global economy, particularly for New Zealand and other Pacific Rim countries that are heavily dependent on trade with China. New Zealand is China's number one trading partner and the soft trade report out of China has sent the New Zealand dollar tumbling on Tuesday. The markets are braced for more bad news on Wednesday, with the release of Chinese CPI. As China's economy weakens, we're seeing signs of deflation. The consensus estimate for July stands at -0.1%, after a -0.2% in June. On an annualized basis, the estimate for July stands at -0.4%, after a reading of zero in June. Deflation is a signal that China's economy is in trouble, which does not bode well for New Zealand. The Federal Reserve continues to send a hawkish message to the markets, which has helped boost the US dollar. Fed member Bowman said on Friday that the Fed might have to deliver "additional rate increases" in order to bring inflation back down to 2%. This would put her at odds with the money markets, which have priced in a pause in September and are looking ahead to rate cuts early next year. On Monday, FOMC member Williams said that he expects that the Fed will need to keep a restrictive stance "for some time", dependent on the data. Still, the money markets have priced in a pause at the September meeting, which would mark only the second pause since the Fed began raising rates in March 2022. NZD/USD is putting pressure on support at 6031. Below, there is support at 0.5964 0.6129 and 0.6196 are the next resistance lines
by OANDA