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• Australian press says PM Rudd to call September 7 election … But PM says he’s made no determination (on) date
• China non-manufacturing purchasing managers’ index (PMI) rose to 54.1 for July (from 53.9 in June)
• Reuters poll shows dealers now ‘split’ over September tapering
• Technical analysis in real time
• Jiji press: IMF report cites concerns over Japan’s fiscal situation
• Bank of Japan prod Abe to keep sales tax hike on schedule
• Federal Reserve’s forecasts looking very optimistic
• “Jobs Data Muddy Fed Outlook” – the August jobs report (due September 6) is now all the more crucial
• Calculated Risk on the employment report: Steady, but Slow Improvement
• Five Takeaways From Jobs Report
• Federal Reserve’s Bullard: Need More Data Before Taper Question Can Be Settled
• ForexLive Americas wrap: Jobs blues weigh on dollar
• Geithner takes himself out of the race for Fed Chairman
• CFTC Commitments of Traders: Euro shorts throw in the towel
• Fed’s Bullard upbeat on jobs report
• Berlusconi’s party threatening resignations and elections if he’s not pardoned
• Best trade this week: Long EUR/AUD
• Berlusconi suddenly takes an interest in justice reform
• Canadian housing still touch-and-go
• When Bullard is wrong, at least he admits it

Australian press says PM Rudd to call September 7 election … But PM says he’s made no determination (on) date Posted: 03 Aug 2013 12:09 AM PDT Reports in the Australian press on Saturday morning said Australian Prime Minister Kevin Rudd had ‘settled on the date’ for the election: September 7. Later reports in other outlets, though, had Rudd denying he had decided on the date: “I’ve made no determination whatsoever in terms of the date of an election.” If Rudd does decide on September 7 it would need to be called by Monday.

China non-manufacturing purchasing managers’ index (PMI) rose to 54.1 for July (from 53.9 in June) Posted: 02 Aug 2013 09:39 PM PDT From China’s National Bureau of Statistics on Saturday: Non-manufacturing purchasing managers’ index (PMI) rose to 54.1 for July (from 53.9 in June) New orders remained the same at 50.3 in July as it was in June New export orders at 53.1 in July compared with June’s 50.4 In a breakdown of sectors, growth in the tourism and telecom industries gained traction rapidly, raising the employment sub-index in the services sector to 53.0 in July, up from 50.0 in June The sub-index measuring input prices rising to 58.2 last month from June’s 55.0,indicating some potential inflationary pressures - The HSBC China services PMI is due at 0145GMT on Monday (August 5), prior was 51.3 Added – summary available here

Reuters poll shows dealers now ‘split’ over September tapering Posted: 02 Aug 2013 09:39 PM PDT In the wake of Friday employment numbers, which while not too hot, nor too cold, were not just right either … a Reuters poll of US primary dealers shows fewer expecting the Federal Reserve to begin tapering in September than a month ago: A Reuters poll on July 5 saw 11 of 17 dealers expecting purchases to slow in September, 3 in October, 2 in December, and 1 in Q1 2014 The poll taken on Friday now shows 9 expect a Fed reduction in September, 2 in October, 5 in December, 1 in “Q4 2013″, and 1 in “Q1 2014″ The median estimate of the 18 economists saw an initial Fed taper of $15bn/month (against $20bn/month in the July poll).

Technical analysis in real time Posted: 02 Aug 2013 05:53 PM PDT A couple of weeks ago I highlighted a trade set up in real time from one of ForexLive’s long time contributors Ayman Khlifat It was a great EUR/USD trade, with the set up posted in advance and then the entry, and profitable exit, tweeted out from Ayman as they occurred. He’s at it again, this time in GBP/JPY, posting the set up last week: Technical Analysis – Reasons To Buy The GBPJPY  Trade Entry At 150.20 , Stop At 147.60 Targeting 153 , 156 and 161.60 More great work from Ayman, in real time. Find him at his blog and on on Twitter @aymankkhlifat

Jiji press: IMF report cites concerns over Japan’s fiscal situation Posted: 02 Aug 2013 05:53 PM PDT Jiji press reports that The International Monetary Fund has expressed concern about the fiscal situation in Japan Says “Simulations by the IMF "suggest that global output losses could reach 2 percent of GDP"  if Japan is "exposed to a reconsideration of sovereign risk by investors and experiences a long-term interest rate jump of two percentage points” The IMF have called for a credible fiscal consolidation plan Says "The pickup in growth provided by short-term fiscal and monetary stimulus is expected to wind down after a year or so." ADDED – Here’s the Jiji report:  IMF report cites concerns over Japan's fiscal situation

Bank of Japan prod Abe to keep sales tax hike on schedule Posted: 02 Aug 2013 05:53 PM PDT At next week’s BOJ meeting (Wednesday and Thursday) its thought that BOJ officials may spend some time speaking to government representatives (who attend BOJ meetings) about moving forward with the sales tax hikes on schedule. Such discussions wont come up in the formal announcement made at the end of the meeting in Thursday, but will be included in the minutes to be published on September 10, which is around the time the final decision on the scheduling of the rises will be made. Japan’s sales tax is due to rise to 8% from 5% in April, 2014 The debate within the government centres on concerns that the last time an extra sales tax was imposed, consumer spending suffered and hence the economy. But not imposing the tax to gain extra revenue risks further ballooning of Japanese government debt. Its a a tough dilemma for the administration and debate is ongoing. More here. - Added – Here’s a great piece of background from the Economist: Taxonomics Financial markets have counted on the tax rise going ahead despite a change of government since then. This week the authorities surprised them by saying they would set up a panel to examine whether to proceed as planned. The plan is to lift the levy from 5% to 8% next April and to 10% in 2015.  The fear is that a rise in revenues from the tax could be far outweighed by years of lost growth if consumers take fright. An alternative could be to lift the tax more gradually. Koichi Hamada, an economist at Yale University who helped to design Abenomics, has said that the levy could be raised in increments of 1% over five years. Mr Abe's panel will study this option, among others

Federal Reserve’s forecasts looking very optimistic Posted: 02 Aug 2013 05:52 PM PDT This is an earlier piece from Reuters that I’m posting as it discusses the economic forecasts of the Federal Reserve, which seem to be on the very optimistic side. As Bernanke has repeatedly said, the Fed’s timeline for winding down asset purchases was always going to be contingent on the overall health of the economy and whether it grows as quickly as central bank policymakers expect it to. Growth came in at 1.1% in the first quarter And 1.7% in Q2 But private sector economists agree that the economy has a lot of lost ground to make up if it is to deliver the kind of growth the central bank has penciled in. Many have noted that the economy would have to average 3.1 percent growth in the second half just to hit the low end of the Fed’s expected 2.3 percent-to-2.6 percent growth range for 2013. “I reckon it’s a tall order to achieve that growth pace,” said Thomas Lam, an economist at OSK-DMG Note – “the average estimate of economists in a recent Reuters poll puts second half growth at 2.45 percent”, that is well below the 3.1% required. If growth remains sluggish the Fed will cut their economic forecasts and the beginning of ‘tapering’, which Bernanke has always said is ‘data dependent’ (he’s had to say this over and over again to get analysts to finally listen), will be delayed.

“Jobs Data Muddy Fed Outlook” – the August jobs report (due September 6) is now all the more crucial Posted: 02 Aug 2013 05:52 PM PDT Real Time Economics blog asks: “What does this mean for the Federal Reserve's $85 billion-per-month bond-buying program?” And answers: The report muddies the outlook for what the Fed will do at its next policy meeting (September 17 and 18) Says the report wasn't overwhelmingly good or bad Makes the next report (the August report, due September 6) more crucial for the Fed. The article says “Mr. Bernanke in June (said) that if the Fed's economic forecast plays out as expected, the jobless rate would probably be around 7% when the Fed ended the bond-buying program altogether. Mr. Bernanke said the Fed thinks could happen by mid-2014. So by this measure, the labor market appears to be on the track the Fed expects.” Note the “if the Fed's economic forecast plays out as expected”; the Fed’s economic forecasts are thought to be a good way on the optimistic side and seem unlikely to be met (I posted about this in June, here: When you hear that the Federal Reserve GDP forecasts are optimistic, what does that mean? and here’s more: Federal Reserve's forecasts looking very optimistic) The article also notes that its not only this lacklustre jobs report that could influence Fed decision-making: Mr. Bernanke has voiced concern that recent increases in mortgage rates could harm the housing recovery and suggested that any perceived damage to the housing market could cause the Fed to hold off on reducing QE. There’s also the ‘shoot yourself in the foot’ risk from Congress: “Congress is back to budget brinksmanship, with the threat of a possible government shutdown in the fall and another market-rattling fight over the federal government's borrowing limit looming ever-larger.”

Calculated Risk on the employment report: Steady, but Slow Improvement Posted: 02 Aug 2013 05:52 PM PDT Calculated Risk takes a longer-view of the report, looking at y/y changes: The y/y change in employment – to minimize the monthly volatility – total nonfarm employment is up 2.276 million from July 2012, and private employment is up 2.315 million. That is essentially the same y/y gain as in June (2.267 million total, 2.331 million private year-over-year in June) Says its “steady, but not strong, job growth” Hourly wages declined slightly in July, but are up 1.9%y/y(hourly wages were up 2.1% y/y in June) The decline in the unemployment rate to 7.4% from 7.6% in June was due to a larger increase in employment in the household survey (227,000 increase in jobs) combined with a decline in the participation rate (not good news). If the participation rate had held steady, the unemployment rate would have declined to 7.5% instead of 7.4%. In general this report was more of the same – steady but slow improvement. Check out the full post at the link: Employment Report: Steady, but Slow Improvement

Five Takeaways From Jobs Report Posted: 02 Aug 2013 05:51 PM PDT The Wall Street Journal Real Time Economics blog is downbeat on the NFP: Don't get too concerned about the headline number being weaker than expectations — it's well within the margin of error. Hourly wages fell by 2 cents on average — not a huge drop, but nonetheless a move in the wrong direction This month’s reports suggests a weakening outlook: companies trimmed employees' hours, temporary jobs — which can be an indicator of permanent hiring in the future — grew at their slowest pace since last fall, the revisions were a bad sign — the government tends to underestimate growth during good times and overstate it during bad times, so downward revisions can suggest the labor market is weakening. Little confidence from workers The health sector added a mere 2,500 jobs in July, the fewest in a decade. Meanwhile, one of the most persistent drags on growth, the public sector, showed signs of stabilizing. More details at the Wall Street Journal (ungated): Five Takeaways From Jobs Report There’s also more here – various economists’ reactions to the jobs report: Economists React: Jobs Data Disappoint on Multiple Fronts (again, non-gated)

Federal Reserve’s Bullard: Need More Data Before Taper Question Can Be Settled Posted: 02 Aug 2013 05:51 PM PDT Adam had a couple of posts up on Federal Reserve Bank of St. Louis President James Bullard’s speech today, here and here. Here’s a bit more of a recap of his speech in Boston on Friday from a (non0gated) Wall Street Journal article, the most important part being: said the Fed "needs to see more data on macroeconomic performance for the second half of 2013 before making a judgment" about the pace of its $85 billion-per-month program of bond buying. He noted that inflation is "low" and "near the lower edge of acceptable outcomes." Based on the unemployment rate alone, declines in joblessness suggest improvement, while other measures indicate the labor market might not be as healthy as the unemployment rate indicates. But he also said "payroll employment growth has generally been strong” On the growth front, recent data have been "weak," but there are reasons to be hopeful for the future More details at the link: Fed's Bullard: Need More Data Before Taper Question Can Be Settled

ForexLive Americas wrap: Jobs blues weigh on dollar Posted: 02 Aug 2013 02:12 PM PDT Forex headlines for Aug 2, 2013: Non-farm payrolls 162K vs 185K exp Unemployment rate 7.4% vs 7.5% exp PCE core 1.2% y/y vs 1.1% exp US June factory orders 1.5% 2.3% exp July US NY ISM business conditions index 67.8 vs 47 prior Bullard: Unemployment coming down is good news Fed's Plosser calls for clear boundaries in fiscal and monetary policy US warns of possible terrorist attacks in Middle East and North Africa Berlusconi's party threatening resignations and elections if he's not pardoned S&P 500 up 0.2% to 1709 For the week, S&P 500 gained 1.1% GBP leads, NZD lags The jobs report will cause some economists to take a long, hard look at the chances of tapering in September but it certainly wasn’t a smoking gun. The US dollar fell around 60 pips on every cross following the numbers. There was the regular bounce after the news but EUR/USD, USD/JPY and GBP/USD continued. Cable was especially perky as it climbed more than 150 pips following four days of declines. Stops above 1.5250 and 1.5300 were tripped. The commodity currencies weren’t so lucky. They climbed along with the rest of the market on the NFP headlines but the moves quickly ran out of steam. I spoke with Reuters about why the Canadian dollar was unable to rally. Overall, the market leaves the week with a mixed picture. Most US economic data was better and that probably lends a hand to the dollar once the dust settles. The gains are likelier to come easier against the commodity currencies than the euro because the ECB wasn’t so dovish yesterday. The main events in the week ahead are the RBA decision and the BOE inflation report. Have a great weekend.

Geithner takes himself out of the race for Fed Chairman Posted: 02 Aug 2013 02:01 PM PDT Bloomberg reports that Geithner has insisted as serving as only an adviser for who should get the job, not a candidate. In the 2009, during discussions about re-appointing Bernanke, Geithner didn’t recommend Summers because they clashed in policy discussions, according to BBG source. The story seems to indicate Geithner wants to be out of the spotlight and out of Washington — I think the feeling is mutual.

CFTC Commitments of Traders: Euro shorts throw in the towel Posted: 02 Aug 2013 12:39 PM PDT Futures market speculative positioning data from the CFTC Commitments of Traders report as of the close on Tuesday, July 30: EUR net short 8.5k vs short 28k prior JPY net short 82K vs short 87K prior GBP net short 49K vs short 49K prior AUD net short 73K vs short 64K prior CAD net short 11K vs short 17K prior NZD net short 1K vs short 2K prior CHF net short 1k vs short 5K prior Dollar Index net long 25K vs 28K prior Euro shorts headed for the exits, which will lead to a more balanced market and, ironically, makes it a better time to short. Otherwise, not much notable to report except that AUD shorts are definitely getting crowded — it’s the largest short position on record, narrowly exceeding the -70K reading in early July. AUD net position – CFTC

Fed’s Bullard upbeat on jobs report Posted: 02 Aug 2013 11:56 AM PDT The decline in the unemployment rate is ‘basically good news’ despite the continued decline in participation rate The latest jobs report consistent with 6-9 month trend It’s dead out there. CFTC positioning out shortly and some intrigue about whether stocks can close higher.

Berlusconi’s party threatening resignations and elections if he’s not pardoned Posted: 02 Aug 2013 11:27 AM PDT It sounds like the PDL will give President Napolitano an ultimatum — pardon Berlusconi or elections. PDL ministers are prepared to resign if needed. Makes you wonder what kind of dirt Berlusconi has on his own party members if they’re willing to resign for him. It also provides some insight on why there was such a bitter fight for the (mostly symbolic) position of Italian President. Napolitano is 87-years-old and from the Communist Party so it’s not clear what Berlusconi’s chances are or if his ministers are bluffing.

Best trade this week: Long EUR/AUD Posted: 02 Aug 2013 11:13 AM PDT Long EUR/AUD has been an absolute freight train since April (a freight train filled with money). It was easily the best performer in the second quarter and is ramping up again after a two month break. This week, it gained in 4 of the 5 sessions with only a miniscule loss on Thursday. The total gain was 3.75%, or a whopping 561 pips. Up close, the trade looks like a runaway rally that’s gone too far, too soon. But zoom out and it looks like it could still run a long ways. EUR/AUD was a heavily-invested carry trade and with the ECB edging toward the sidelines this week and the RBA poised to cut rates next week, it could be time for an extended run. Ryan looked at the EUR/AUD technicals on Wednesday and Citi why you don’t bet against a trend with this call.

Berlusconi suddenly takes an interest in justice reform Posted: 02 Aug 2013 10:42 AM PDT Silvio held a meeting with his party today and Reuters had a source inside. The source says Berlusconi told his party to press for justice reform or seek new elections. The risk of an election is a surprise because most people expected Berlusconi to try to avoid elections. Earlier today, Silvio vented his anger in a video, describing ‘judicial harassment’.

Canadian housing still touch-and-go Posted: 02 Aug 2013 10:32 AM PDT Canadian dollar bears love to point to the real estate market. It’s overvalued by any measure but guessing when a bubble will pop darn-near impossible. For instance, Vancouver’s real estate board reported existing home sales up 40% y/y in July and prices are up 2.3% in the last six months. Meanwhile, in there is a report today that Toronto high-end condo inventory for sale is extremely high and there are no buyers.

When Bullard is wrong, at least he admits it Posted: 02 Aug 2013 10:09 AM PDT St. Louis Fed President James Bullard has gone from hawk to dove this year but he has a sense of humor about how wrong he has been. “If you’ve followed my forecasts, you’ve probably lost a lot of money,” he said today. In January he was forecasting 3.2% growth this year; at this point the consensus is down to 1.8%. You can reconcile the difference with the sequester. Most Fed officials thought Congress wasn’t crazy enough to ghost-ride the economy into the abyss (joke’s on us, right!). The real puzzle is how job creation has been so strong despite lackluster growth. It could be a full-time/part-time thing but there are no clear answers.

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