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Will US employment data send USD lower still?

Good morning


US dollar was under continued pressure yesterday as a weaker than expected data drives the market to look for slower rate rises. I have been taken by surprise at the scale of USD weakness, it was pretty clear a while ago that we’d be looking at a 50bps rate rise in Dec. This alone cannot be responsible for the recent weakness we have seen. Fed officials are still saying Fed has a way to go before rates will peak. Perhaps the talk of job losses and risk of recession are now in focus.


Just how low is USD? GBPUSD traded to 1.2310 yesterday afternoon, highest level since June and importantly through the area that capped the upside back in August. It is a touch lower for now at 1.2270 but for once it feels as though the risks are to the upside. EURUSD took a similar path trading, breaking above 1.0500 to reach 1.0540 this morning, again the highest level since June. GBPEUR has been pushed around a bit this week, trading as low as 1.1530 on Monday, and up to 1.1700 yesterday afternoon, first time since August we have seen that. Currently 1.1655.


China may indeed be changing its Covid stance, as cities Guangzhou and Chonqing relax some Covid restrictions. China is still a long way from reopening, some of the relaxing of restrictions is still fairly limited but there is some thinking China could fully reopen by the time their National Peoples Congress takes place next March.


It was an exciting day in the World Cup yesterday with Germany going out of the competition as Japan came from behind to beat Spain to put them top of their group. A miserable performance from Belgium sees them also bow out of the competition, that really is a team that on paper promises to do well but never quite lives up to expectations. Mind you, their opponents Croatia, finalists in 2018, have proved that they are still a force to be reckoned with, although it was Morocco who topped their group.


Today sees the final round of group matches, Brazil and Portugal are through in their groups but the remaining three teams in each group all stand a chance of qualifying. Then of course the knockout stages begin, with England taking on Senegal on Sunday. We have seen a lot of ‘top’ teams humbled by ‘lesser’ opponents. Lets hope England put on a good show.


Speaking of England and good shows, our cricketers have had a wonderful start in the Pakistan test match. Four batsmen scored centuries as England put on the highest first day test score in history, and have gone on to reach a total of 657 in the first innings. Pakistan are in bat, now we see what Englands bowlers can do.


We have US employment numbers today, a headline of around +200k is expected. Anything higher could see some USD upside suggesting things are not so bad but anything lower could add weight to recent lower USD sentiment. If that headline comes in much lower, we could see a significant USD move lower this afternoon. Watch the unemployment rate as well, this ticked up to 3.7% from 3.5% last month. We do also have some Fed officials offering their final thoughts before we go into the blackout period ahead of the FOMC meeting.


Just a final note to anyone who has a thing for patterns in numbers. Today is 02/12/22. OK, not the most exciting thing going on but for some reason it still gets my attention. Enjoy the day and have a splendid weekend as and when it arrives. I have so far managed to stay away from the kids advent chocolates but there’s a long time to go yet……


- 13.30 US nonfarms payrolls

- 13.30 ECBs Nagel speaks

- 13.30 CAD unemployment

- 14.15 Feds Barkin speaks

- 15.15 Feds Evans speaks

- 02.30 ECBs Lagarde speaks



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