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  • richard evans

Nonfarm payrolls to set the tone for USD

Good morning

US dollar fails to regain recent losses ahead of todays nonfarm payroll data. GBPUSD now 1.2185, EURUSD 1.0540, GBPEUR 1.1560. USDJPY at 148.85, buyers lack conviction approaching 149.00 after the likely intervention earlier in the week.

Today is all about the nonfarm payrolls. Headline expected around +170k, unemployment rate is expected to drop to 3.7%. I have seen a couple of banks looking for stronger numbers. CITI for example see a headlines of +240k and unemployment rates down at 3.6%, UBS look for +200k. BNP on the other hand are looking for a lower headline, around +150k. With focus this week very much on US jobs data, there is a better than normal chance of USD volatility over this release. Better numbers will encourage the USD bulls, weaker numbers will encourage the doves at the Fed. Fed officials do seem to be mixed, with some calling for higher rates and others clearly thinking rates are restrictive enough already.

Plenty of attention on the nonfarms from the equity markets as well. The S&P500 is already down around 8% from its highs just a couple of months and if a strong set of numbers today triggers more ‘higher rates’ feelings then we could see further declines there. I understand why, but it still strikes me as a bit odd when decent economic data isn’t good news for the markets.

In case of a strong number, a Monday expiry 1.2150 GBPUSD put costs around 15 $ pips (ie breakeven 1.2135), a 1.0500 EURUSD put costs about the same. Gives some cheap, low risk interest and offers something to trade spot against if we do see USD push higher.

Elsewhere, ZAR surprised by weakening quickly yesterday, with USDZAR trading up through 19.50 to hit 19.63 before settling back this morning to 19.43. GBPZAR moved up as high as 23.82 overnight but has slipped back to 23.70 this morning. The moves seems to have been triggered by comments from SARB official Kganyago who said it is futile trying to defend the exchange rate. There is also a suggestion that South Africas FinMin Godongwana will want of a wider than expected budget deficit when he presents on 1st Nov.

Romania kept interest rates unchanged at 7% yesterday, RON pushed a smidge higher.

In sports, England put on a disappointing display, losing convincingly to New Zealand in one of those games where it is difficult to understand how one side can make it look so difficult, the other make it look so easy. England were way short of their best form and hoping for better things when they meet Bangladesh on Tuesday. Its Pakistan v Netherlands today.

New Zealand also made rugby look easy, demolishing Uruguay 73-0 yesterday. France v Italy this evening, while tomorrow sees Ireland v Scotland, Wales v Georgia and England v Samoa. A couple of possible belters there.

Spurs can go top of the table tomorrow if they can beat newly prompted Luton, and could stay there for 24 hours given the other teams at the top don’t play until Sunday. Arsenal v Man City Sunday could be a good match although I’m not sure who I want to win. A goalless draw would do the job. Liverpool play Brighton Sunday, VAR will be hoping for no contentious issues to contend with there.

It is a US holiday Monday and next week begins with a couple of days of limited economic data. Might need the rest after this afternoon!

Have a great weekend, next few days are forecast to be in the 20’s here which is pretty pleasant for October. Enjoy it while you can….

- 13.30 US nonfarm payrolls

- 13.30 CAD unemployment

- 17.00 Feds Waller speaks

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