Archives of “August 7, 2020” day

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EUR/USD: A Buy On Dips; USD/JPY: Next Move Lower; GBP/USD: 1.32 Next Critical Levels

  
Analysis, Forex
“For G10, GBP takes center stage in light of a less-dovish-than-expected BoE meeting this morning.The next critical level for GBPUSD is 1.32. USDJPY continues to hold 106, reaffirming our bias that the next move is lower. EURUSD continues to hold below 1.19 but remains a buy on dips in the months ahead,“
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China’s Global Times says the US is becoming the biggest uncertainty in future global economic growth

  
  Analysis
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An opinion piece in the state-owned tabloid

Some of the remarks in the piece:
  • The US has rolled out a series of policies to monetize financial deficit …  which has aggravated financial risks in the country, and cast a shadow over further investments.
  • US’ failure to handle the coronavirus may even prolong the pandemic
  • skyrocketing unemployment has resulted in sliding consumption which in turn is causing a decline in exports from its trade partners
  • huge debt and expanding stock market bubbles have damaged the confidence of global investors
GT is a barometer of official thinking in China re the US, relations between the two contries are on a downward path.
Global Times editor Hi Xijin:
An opinion piece in the state-owned tabloid

Non-farm payrolls preview: Half the expected jobs gain in July are because of a quirk in seasonal adjustments

  
  Analysis
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Teaching jobs are a big quirk

The consensus for Friday’s non-farm payrolls report is for 1.5 million jobs gains in the month but that doesn’t tell the real story.
The ADP report this week got some attention because it showed private hiring at just 167,000 jobs. Normally, you would expect that to take a big bite out of expectations, but it hasn’t.
Why? A big reason is seasonal adjustments in the data.
Normally, one of the easiest and clearest seasonal adjustments is teachers. They’re laid off at the same time every year and hired at the same time every year. So you discount the lay offs in June/July and the hires in Aug/Sept. It all washes out.
This year though, teachers were laid off early — in April, May and June.
In the BLS model, most of those layoffs are supposed to happen in July. So what happens is they add nearly 1 million jobs to the total before they even start counting. The thing is, those layoffs haven’t happened this year.
teacher
Because of that effect, job losses were overestimated in April/May and now will be added back in July. They estimate the effect at +850K jobs.
Still, that number could be fluid and the assumptions and adjustments the BLS makes will be critical in how it turns out. The risk is that it shows a skewed picture.
Given that, the better spot to watch may be the unemployment rate, which is taken from the household survey. This has its own problems because many people laid off because of COVID-19 have been misclassified — a problem the BLS has been struggling to correct. The consensus there is an improvement to 11.2% from 12.3%. Private payrolls (consensus +1398K) could also offer a clearer look at the economy excluding teacher effects.
As for trading it, watch out for people pointing to the seasonal adjustment effect after the fact. But note that it should already be priced in.
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