Morning analysis 06/08/2015

Signals are mixed going into Friday’s employment report with ADP calling for big trouble but ISM calling for a big gain. And it was ISM’s non-manufacturing sample that took the day’s headlines, showing the greatest strength in 10 years including an outsized gain for its employment index.

Friday’s employment report will be a flop, based on ADP’s estimate for private payrolls which it sees rising only 185,000 the markets will watch initial jobless claims today and will position accordingly for NFP tomorrow.

ISM’s non-manufacturing sample reports a giant surge of strength, to 60.3 for the July index and the highest reading in 10 years. The rise in export orders underscores the strength of the nation’s trade surplus in services which, despite strength in the dollar, is getting a boost from foreign demand for technical and management services. The service sector appears to be rolling along fine and will likely continue to offset weakness in manufacturing and industrial services. For Friday’s jobs report outlook, the employment index in this report will help offset this morning’s very weak ADP estimate.

Looking forward, today will be a huge day for the GBP. We have massive amount realises from the BOE; the rate hike vote, BOE minutes, inflation report and lastly BOE governor Mark Carney will hold a press conference. The market is expecting to 7-2 vote for a rate hike some analysts are calling for a 6-3 vote. If the consensus is correct then I will expect the GBP to strengthen across the board.

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