The EUR/USD was steady before the key reports on the US labor market. Spain's economy is getting better. The zloty extended decline.
The latest data from the US have not given a clear answer to the condition of the economy. Although the GDP report in the last week showed some acceleration, but it missed the forecast. Similarly with the ISM index that was published yesterday. The major sentiment gauge missed the expectations. But its composites, especially the orders index, were somewhat positive.
Also, the labor market numbers were in a similar fashion. Yesterday's report on income and outlays of households showed a steady increase in consumption and wages. However, last week's employment cost index was the lowest since records began. Given the situation, the next reports from the labor markets will be very helpful with assessing the outlook for the Federal Reserve's plan.
On Wednesday, the ADP report on employment change in the private sector is scheduled. The forecast is for a 210k increase after a 237k gain in the prior month. Tomorrow's data will give some hints before the report on the employment situation due on Friday. The forecast is for a 212k employment gain in the non-farming sectors and the unemployment rate is expected at the 5.3 percent level (unchanged from the previous month). The wage increase is forecast at 0.2 percent against no gain in the previous period.
The Federal Reserve said that the doors for an interest rate hike in September are wide open. However, the decision will be based on the labor market performance and the outlook for the inflation rate returning to the Fed's goal. The lack of clear direction for the EUR/USD reveals that the recent reports have been vague. As a result, the coming reading will weight significantly on the markets, especially if they miss the forecasts.
Spain is getting better
Today's figures from the Spanish labor market were very good. The number of unemployed people declined 74k after dropping 95k in the previous month. The forecast was for a 45k decline. Earlier the reports showed that the GDP growth in the second quarter was the fastest since 2007.
Spain like Greece has been hit by the fiscal crisis. However, the nation managed to improve its performance by labor market reforms and budget cuts. Today, Madrid is in much better shape than Athens.
The Greek stock exchange posted the next disastrous session after trading was restarted. On Monday the Greek stock market reopened after five weeks. However, there were some signs of stabilization. Currently, the crucial task is to secure the disbursement from the bailout program before the European Central Bank bill is due. The Greek government said it expects to close the talks before 18 August.
The zloty declined for a second day against all its major pairs. The Polish currency was influenced by the negative sentiment against the emerging markets currencies. The Russian rouble was heavily hit. Moreover, if the US labor market data supports the case for interest rate hikes in September, the zloty will remain under pressure.