The US jobless claims data

The US jobless claims data was better than expected with a decline to 329,000 in the latest week from a

revised 345,000 previously and this was the lowest reading for over five years. The ISM non manufacturing

release was also robust with a rise to 55.4 for July which was the highest reading since March 2011. 

There was a strong increase in orders and the employment component was also firm which

increased optimism surrounding Friday’s crucial payroll report. Any increase in the 200,000 region would

increase expectations that the Fed will taper bond purchases at the September FOMC meeting.

As expected, the ECB made no changes to interest rates at the latest council meeting with the repo rate

left at 0.50%, maintaining the focus on President Draghi’s press conference. The comments were broadly

in line with last month’s meeting with confidence showing some recovery from very low levels. 

Economic risks, however, were still described as biased to the downside. The bank remained committed to forward guidance without adopting any specific numerical thresholds. 

Draghi did comment that the rise in money market rates was not justified and that monetary policy would remain very accommodative.

The Euro briefly dipped to below the 1.32 level on the combination of better US data and the ECB pledge

for low interest rates as there was a significant recovery in US yield support to a three-week high.