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ECB: stick or twist?

US jobs shock

One US economic statistic yesterday highlighted the impact of trade wars on the US economy. ADP's monthly employment change showed a net 27k new jobs in May: not many. More importantly, the services sector maintained its momentum while manufacturing and industry shed jobs.

ADP, a personnel and payrolls outsourcing firm, does a monthly count of nonfarm workers and publishes the net change, a couple of days ahead of the official employment report. It is not a wholly reliable guide to the closely-watched nonfarm payrolls figure but the two statistics tend to share the same main features. Given that ADP's 27k increase was only a tenth of the expected figure, investors were bound to wonder how tomorrow's official figure might differ from analysts' consensus of a 185k increase.

The US dollar swooned on the news, losing half a cent to the pound and the euro. Fortunately, within a couple of hours ISM's services sector purchasing managers' index came in a point above forecast and a point higher on the month at 56.9. The dollar made a complete recovery and is a sixth of a cent higher on the day against sterling.

Mostly not bad

America's other services PMI, from Markit, did not have the same sparkle as the ISM measure but at 50.9 it was at least in line with forecast. Among the European PMIs only France's 51.5 missed its target. Italy scraped in with a neutral 50.0; it and the rest of them were all better than expected, as was Britain's 51.0.

Other than the ADP jobs number and a further 2.5% erosion of oil prices to a six-month low, investors found little new to worry them and they were not inclined to get too excited about currencies. The South African rand took another beating as a result of central bank independence concerns  and lower oil prices cost the Norwegian krone 0.4%, but away from those two, only 0.2% separated the best and worst performers.

ECB and American jobs

The next 48 hours' statistics start with Euroland growth and move on through North American trade figures to Friday's US and Canadian employment data. The most important non-statistical agenda item is the press conference that the European Central Bank president will host at 13:30h.

The ECB is in a bind. Inflation remains stubbornly below its 2% target and growth is sticky. In an ideal world the central bank would be inclined to cut interest rates but it has none left to cut. Its only real option may be to restart its quantitative easing programme. Some argue that Mario Draghi will announce this at his press conference: most do not see it happening - not today anyway. If the bank were to go down that path the euro is likely to suffer.

There will be appearances by other central bankers today. The Bank of Japan's Kuroda San and the Bank of England's Mark Carney are speaking in Tokyo this morning. The Dallas Fed's Steve Kaplan is up at lunchtime and will be followed this evening by John Williams, his opposite number in New York.

GBP: Almost flat against the majors

GBP: Almost flat against the majors

EUR: Monetary policy announcement today

EUR: Monetary policy announcement today

ZAR: Second day of punishment

ZAR: Second day of punishment

USD: Rattled by low employment change number

USD: Rattled by low employment change number

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