All eyes on August NFP after Draghi sends Euro crashing

4 September,, Lagos – UK services PMI data released yesterday showed that services growth unexpectedly slowed to the lowest since 2013, adding to signs that the economy is slowing in the third quarter. According to the official report from Markit, growth of business activity moderated for the second month running, primarily as a result of the slowest increase in new business since April 2013.

Growth remained strong overall, however, and was broadly consistent with the long-run survey average. Firms raised headcounts at a faster rate than July’s recent low, albeit one that remained slower than those registered during the first half of 2015. Inflationary pressure on input costs eased further, and firms’ charges rose only marginally.

Business expectations remained strongly positive overall in August, with almost half of the survey panel anticipating growth at their units. That said, sentiment eased to the weakest since February. Cost pressures eased for the third month running in August. The rate of inflation hit the weakest since January, with some firms reporting lower fuel (especially diesel) prices. Wages remained the main source of higher average input costs. Prices charged by service providers rose only fractionally.

The report follows disappointing manufacturing PMI data released earlier in the week. The performance of the UK manufacturing remained sluggish in August, as the continued strength of the consumer goods sector was again offset by lacklustre output growth at intermediate goods producers and the ongoing downturn in the capital goods industry. The sterling remained weak on the back of recent disappointing data.
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EUR Minimum Bid Rate and ECB conference

As expected, the minimum bid rate was maintained at 0.05%. However, the highlight for the day was ECB president, Mario Draghi’s dovish comments, sending the Euro plummeting as European stocks surged higher. European indices closed on a positive on the back of Mr Draghi's QE sleight of hand today. London's benchmark FTSE 100 index climbed 1.82pc to close at 6,194.10 points. Mario Draghi signaled a revamped quantitative easing and signaled officials might expand stimulus if the rout in financial markets continues to weigh on growth and inflation.

He stated that that the Governing Council has increased the share of bonds the ECB can buy to 33 percent of each issue from 25 percent. Also, policy makers are ready to make more adjustments to ensure the full implementation of the 1.1 trillion-euro ($1.2 trillion) program. A perceived weaker global outlook also prompted a downgrade across board of institution’s growth and consumer-price forecasts through 2017. The reset of the ECB’s stimulus program after a six-month review gives officials more flexibility as they prepare to continue bond purchases until at least September 2016. Weaker commodity prices, slowing trade and volatility in global equities have fueled speculation that more stimulus is on the way.

US Unemployment claims and other data

From the US, the trade balance figures showed that the goods and services deficit was $41.9 billion in July, down $3.3 billion from $45.2 billion in June, revised. The July decrease in the goods and services deficit reflected a fall in the goods deficit of $3.4 billion to $61.4 billion and a decrease in the services surplus of less than $0.1 billion to $19.6 billion, according to the bureau of economic analysis. Unemployment claims rose more than forecast last week, coming at 282k. While the ISM Non-Manufacturing PMI beat forecast to come at 59.0.

On the calendar today

Its another busy day, as we have all eyes on the August NFP figures to be released, along with other high impact news releases.

-12:10 P.M- FOMC Member Lacker Speaks

-12:30 P.M GMT- Canada Employment Change, Unemployment Rate

-12:30 P.M GMT- Non-Farm Employment Change, Average Hourly Earnings m/m, Unemployment Rate

-2:00 P.M GMT- Canada Ivey PMI

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