US Employment, EU Inflation on the Trading Agenda

August 31, 2022 10:22

Key employment data out of the US and an early inflation reading in the EU are on the trading agenda for the second half of the week.

The ADP Employment Change benchmark is due for release today, Wednesday August 31. The results for August are expected at 200K versus 128K in July. The ADP report is often seen as a precursor to the Non-Farm Payrolls indicator released on Friday, September 2.

So far this year, employment reports have been robust, defying recession and inflation fears as demand for employees spiked. The sharp rise in demand in the labour market is because of the reopening of the US economy following the COVID-19 downturn.

A note of caution: the Federal Reserve does not see the strength in the employment market continuing at high levels, according to a recent landmark speech by Chairman Jerome Powell at Jackson Hole.

“...there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.” Federal Reserve Chairman Jerome Powell.

The central bank’s perspective cast a shadow over the bright spot of US employment conditions, which had supported the USD’s strength and recharged investor risk appetite in the stock markets. As the USD can move during employment releases, anything unexpected in the results could trigger a reaction in the trading markets.

In other news, the preliminary yearly HICP inflation report for the Eurozone is set for release today. The indicator is expected to be at the level of 9 percent in August compared to 8.9 percent previously. Should the actual results be higher than expected, the EUR currency crosses could move on expectations that the European Central Bank (ECB) might react with an interest rate hike up to 0.75 percent.

Finally for the red-flagged trading events today, Canada releases its Q2 annualised GDP results. Economic growth is expected at the level of 4 percent in the second quarter compared to 3.1 percent in the previous quarter.

More key indicators are out on Thursday September 1, when Germany announces year-on-year Retail Sales figures for July, expected at minus 6.5 percent versus minus 8.8 percent in June. If the actual results surprise to the upside or downside, the EUR could move.

Lastly, the ISM Manufacturing PMI is set for release on Thursday September 1, and is expected to have trimmed from 52.8 in July to 52 in August. The final results may move the USD currency crosses if they surprise to the upside or downside.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.