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  • richard evans

USD rally on hold ahead of nonfarm payrolls

Good morning

Well we’ve made it to Friday and the US dollar has paused its rally as we await the key US employment data. A headline in the region of +300k is expected, with unemployment rate holding at 3.5%. Anything better could see USD higher. In fact at Jackson Hole the Fed made it clear that even a weaker labour market would not be enough to stop the Feds fight against inflation so I’m not even sure a weak reading would see USD much lower.

The last nonfarms in early August came out stronger than expected and USD pushed higher, EURUSD was 1.0230 pre-announcement and traded down to 1.0145, GBPUSD was at a heady 1.2140 and slipped back to 1.2005. A similar move this time could see GBPUSD down to 1.1400, difficult to believe perhaps but worth paying 30 usd pips for a Monday expiry 1.1500 gbpusd put just in case.

GBP has had a rough week and it is difficult to see how it can get much better in the short to medium term. BCC say UK is in recession, Monday sees the next Tory leader announced with a warning already from Brussels against triggering Article 50 directed at Truss. She is odds on favourite, Sunak is currently 20-1 which are pretty long odds for a two horse race. Is it worth a couple of quid?

Japan FinMin Suzuki did his best to talk USDJPY down, as did cabinet member Matsuno, but both failed to get the pair back below 140.00, which did a bad job if it really was a line in the sand. 1998 highs around 147 being eyes, beyond that we have the 160 area that was last seen around the time my City career began.

Indeed this weekend marks the 33rd anniversary of my life in the City. 4th September 1989 was my first day of work in a job that wasn’t quite as good as it had been sold to me, but I’m not sure I’d change much if I went back. I’m sure the plan was to be retired by now with my feet up on a Caribbean island somewhere sipping cocktails but quite frankly I enjoy what I do and I certainly don’t feel ready to give it all up anytime soon.

US holiday Monday but looks like a busy week on the data-front. RBA, BoC and of course ECB rate announcement, EU retail sales and GDP, Aussie GDP and trade balance, Japan GDP, CAD employment, as well as UK, EU, US and CAD PMIs through the week. ECB rate meeting Thursday should attract a lot of attention, question really whether we see a 50 or 75bps rise.

Good luck with the nonfarms and once they are out of the way we can look forward to the weekend. Kids are back at school next week so I’m sure the idea is I should be doing something with the family. However I’ve been invited to a bit of hospitality at Chelsea v wet ham so that’ll take up much of my Saturday. Not really a fan of either team but I’m always up for watching football, particularly when there is food and drink involved. Hope Chelsea can afford it after spending a record £278m in this transfer window. And who’d have through Forest would be spending more than Man City, their 21 new signings costing a cool £157m. Mind you, City’s £51m on Haaland currently looks like one of the deals of the century.

- 13.30 US nonfarm payrolls

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