In keeping with the recent theme of solid U.S economic data, the ISM manufacturing numbers surprised to the upside overnight with November’s index level rising to 52.7 from a previous 50.8 – Economists had expected a reading of 51.8. Construction spending rose 0.8 percent in October from a previous 0.2 percent while the ISM gauge of priced paid remained steady at 45 in November. The number of U.S citizens claiming unemployment benefits rose to 402,000 for the week ending November 18 from a previous 396,000. Analysts had predicted a fall to 390,000.
Meanwhile, German Chancellor Angela Merkel has continued to take a hard-line against calls for the European Central Bank to take a more active role in combating the European debt crisis. Merkel has maintained her stance of ensuring fiscal unity across the Euro-zone without the need for the ECB to sacrifice its independence and succumb to political pressure to step in. Merkel is calling for greater budget monitoring for nations that are in economic strife rather than a ‘fight debt with debt’ approached adopted famously by central banks such as the U.S Federal Reserve. This monitoring could potential result in individual Euro-zone government decisions to be vetoed by the European Commission.
Nevertheless, the premise of greater participation from the European Central Bank has also provided the market inspiration in recent days with reports the central bank will take direction action by channeling funds to indebted nations through the International Monetary Fund. This approach will avoid any direct violation of ECB regulation.
After Wednesday’s bumper session with saw the local unit soar above 103 US cents, the Aussie dollar eased in the last 24-hours with price action roughly maintaining a 60 pip channel. In the absence of local economic risk events, we’re expecting the downside to be supported around 101.8 and 102 US cents in the local session. In addition to continued headline risk from the Euro-zone, market participants will also gear up for this evening’s non-farm payrolls in the U.S. If Wednesday’s ADP private sector jobs reading is a valid indication, one may expect tonight’s official job’s report may surprise to the upside. The U.S economy is expected to have created 120,000 new jobs in November against a previous rise of 80,000. At the time of writing the Aussie dollar is buying 102.3 US cents.