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    Asian Session – Chinese holiday, anticipation of US employment report keeps currencies rangebound

    There was limited action during today’s Asian session, as traders seemed to focus more on the upcoming nonfarm payrolls report for September, which comes out later during the day.

    Overall the dollar managed to post some gains following modest selling pressure yesterday after weak business confidence survey readings. The September ISM manufacturing index in the US fell to 50.2 compared to expectations of 50.6, coming dangerously close to the 50 expansion / contraction line. The previous month’s reading was at 51.1. Weekly jobless claims rose, which was also suggestive of a mild slowdown.

    Having traded as high as 1.1203 during the Asian session, the euro backed down to 1.1175 versus the greenback. A Draghi speech overnight contained little that was market-moving. The dollar was also stronger versus the Japanese yen; climbing above the 120 mark once again as uninspiring economic data out of Japan did not help the yen. Household spending data was strong in Japan, but unemployment ticked up to 3.4% from 3.3%. The previous day’s quarterly Tankan survey was mixed, indicating pockets of strength and weakness for the country’s businesses. One encouraging beat was that capital expenditure plans for small and big manufacturers were either posting faster-than-expected growth for the big firms or smaller-than-anticipated drops for their smaller rivals.

    Australian retail sales for August were another interesting data point, but they were announced in-line with estimates at 0.4% month-on-month and caused little reaction. The Australian dollar managed to post modest gains to trade just below 0.7050 against the US dollar at 0.7047. The absence of bad news out of China because of the Golden Week holidays as well as decent business confidence surveys out of the world’s second largest economy the previous day, has helped the aussie during the latest sessions.

    Looking ahead to the remainder of the day, the US jobs numbers will undoubtedly dominate the market’s attention. Before that however, UK construction PMI could be interesting, as the number could show a slight acceleration of the sector. The all-important employment report is expected to show that the US economy added 203 thousand net new jobs during September, while the unemployment rate should remain at 5.1%. The average earnings month-on-month growth should slow to 0.2% from the previous month’s 0.3% quick pace. The monthly jobs report could help the Fed to make up its mind on keeping rates steady or raising them during the October meeting, although a relatively good August report failed to convince the Fed to move in September.

    Following the payrolls numbers, August factory orders later in the day will take a back seat but could still make an impression on markets.

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