The final trading day of the month can often be somewhat peculiar, but today has taken the biscuit. Normally, the US Employment Cost Index (ECI), which tracks wages and other employment benefits, doesn’t attract much attention, but in today’s lacklustre session investors seemed only too glad to latch on to the figure, which dropped to its lowest level since 1982.
Since the Federal Reserve has been very keen to track consumer spending as a gauge of the recovery, the data does have some importance, but usually it passes almost unnoticed. Today, however, it caused a handbrake turn in the dollar strength that had dominated for most of the day, leading to a strong reaction in key currency pairs like cable and Eurodollar.
US indices continued to post gains, building on the steady rally witnessed since Monday. Markets are evidently still very jittery about anything that threatens to undermine the current ‘rising dollar’ narrative.
Next week is going to be dominated by what happens on Thursday and Friday. The Bank of England’s decision to roll several events into one marathon session will likely lead to a long process of investigation as to whether this central bank will move first, while non-farms are certain to produce plenty of excitement given the volume-light sessions that prevail in August.
Overall of course, the big theme is still what the Fed does, but for next week we can expect Mark Carney and co to take centre stage.