Taper debate still ongoing

The weaker than expected US jobs report on Friday kept the Fed tapering debate open, with the WSJ’s and known Fed watcher Jon Hilsenrath commenting that the disappointing jobs report has left Federal Reserve officials without a clear cut signal of an economy on the mend. The biggest miss comes from revisions from previous months which shaved off 74k. The 0.1% drop in the unemployment level from 7.4% to 7.3% came due to the participation rate which has now dropped back to levels last seen in 1978. The general thought in the market seems to be that this will not stop the Fed from tapering this month but the size is likely to be scaled back from the expected $25 billion per month to a more modest $10 billion in treasuries and $5 billion in mortgage backed securities.

JPY opened weaker at the start of trading this week in Sydney following news that Japan will host the 2020 Olympic Games, beating Istanbul and Madrid. The Nikkei is trading up 2% on the day led by the construction component, with the victory likely to boost Japanese GDP by 0.5%.

In other news Australia has a new Prime Minister in Tony Abbot. The Liberal leader has vowed to reduce corporate tax and boost the mining industry. AUD is rather unchanged on the news as the outcome has been widely expected.

This week’s data releases are the Italian Q2 GDP (Tuesday), UK employment (Wednesday) and EU industrial production (Thursday), along with the euro group and finance ministers holding a two-day meeting starting Friday. In the US, July consumer credit is released this evening, wholesale inventories on Wednesday, weekly jobless claims data and the monthly budget statement on Thursday). Consumer confidence , retail sales and PPI will be out on Friday and for me, the most important news will be the US Senate vote on action against Syria, which is most likely to come mid-week. In Asia Chinese industrial production and retail sales figures are released tonight with the Australian jobs report being released on Thursday.

EUR/USD

Supports 1.3145-1.3100-1.3065 | Resistance 1.3200-1.3240-1.3300

USD/JPY

Supports 99.15-98.50-97.80 | Resistance 100.25-100.80-101.65

GBP/USD

Supports 1.5600-1.5520-1.5450  | Resistance 1.5680-1.5750-1.5825