Economic Report

Both the Bank of England and the European Central Bank raised interest rates yesterday. The BOE shocked the market with their decision, while the ECB's decision was widely expected.

Initial jobless claims in the U.S. came in higher than expected and the Sevice Index showed signs of slowing. This led to the thinking that perhaps the Fed would indeed pause in their rate hike cycle.

Lately all the focus has been on interest rates, so yesterday's drop in the dollar and rise in equities comes as no surprise. The Dow is playing with the 11,300 barrier again, but it will need more bad data today to confirm it's suspicion that the Fed will indeed pause when they meet next week.

Today, non-farm payrolls will be announced at 8:30 EDT. There is quite a lot of ambiguity around this number as usual. It has packed some big surprises of late. The general concensous is for 145K jobs to be added in July. However, some analysts are calling for only 135K. To make matters worse, the currency traders were calling for 155K, but have revised that down to 130K. With all of the data lately showing signs of a slowing economy, I wouldn't be surprised to see a shocker of a number. Something between 110K and 90K is possible, and this would send the Dow soaring. It would also be a feeding frenzy for those who like to short the dollar.

Hold on to your hats kids, this could be a wild ride.

UPDATE: Non-farm payrolls came in at 114K, much lower than expected and unemployment jumped from 4.6% to 4.8%. These were shockers but not as shocking as they could have been. Nevertheless, I had put my money where my mouth was and shorted the dollar. Needless to say, I made a handsome profit. The Dow got a bit of a lift early but has flattened out. I suspect that although everyone now believes the Fed will in fact pause, all this bad economic data is having its effect on buying confidence. Also, that 11,300 resistance level is proving to be tough to overcome with any follow-through.