Video: How Bond Yields Forecast USD Direction.
Month-end flows may have played a role in the move along with expectations for Friday’s jobs report.
The focus now turns to the U.S. labor market tomorrow, with ADP’s employment report on the calendar. Economists are looking for private payroll growth to nearly double, from 330,000 to 625,000 in the month of August. Whether this foreshadows a strong non-farm payrolls report on Friday remains to be seen because ADP significantly underestimated NFPs last month and the rebound reflects the adjustment. With little direction and catalyst, a good ADP report could get investors excited, but the reaction in currencies, equities and Treasuries should be short lived as the drop in consumer confidence and Chicago PMI signal a slower fall recovery.
Rising COVID-19 cases drove consumer confidence to its lowest level since February, and it may not be long before this cautiousness impacts demand. Chicago also experienced a slowdown in manufacturing activity similar to the New York and Philadelphia regions. Wednesday’s ISM manufacturing report should show that this is a national and not a regional problem. The good news is that house prices rose at a record rate in June, according to S&P CaseShiller.
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