FX Update & NFP-Preview


The Dollar has settled above yesterday’s lows as markets anticipate today’s release of the September Non-Farm payrolls report out of the US, which follows a run of recessionary-portending data this week. EURUSD has ebbed back to the mid-to-upper 1.0900s, below yesterday’s 10-day peak at 1.0999, and USDJPY has settled around 106.75-85, above the one-month low seen yesterday at 106.48. Cable and other dollar pairings have seen a similar price action.

The Yen is consolidating after outperforming this week as risk aversion took a grip of global markets. The Japanese currency is registering as the strongest currency out of the main currencies from week-ago levels, presently showing just over a 1% gain versus the Dollar, a 1.6% rise against the Canadian Dollar (which has been afflicted by a 6%-odd tumble in oil prices), and a 1.8% fall in the case versus the Swiss Franc (where SNB buying intervention in EURCHF has been suspected).

Any unexpected weakness in US jobs would likely send the Dollar to new lows, and the Yen to new highs, concomitantly with Treasury yield declines and renewed stock market selling. In this scenario, commodity and developing-economy currencies would also underperform. Expectations are for a 145k rise in non-farm payrolls, versus the previous 130k, though recent data suggests clear downside risk. The “whisper number” (what fund managers are anticipating) is some way lower than this. The Reuters Poll has a range from 85k to 185k, Hourly earnings are seen rising 0.3% from 0.4% in August, while the unemployment rate, a laggard indicator of economic health, should dip a tenth to 3.6% (which would be lowest since the 3.5% for December 1969). In addition, the August trade report is due and should reveal a slightly wider deficit of -$54.2 bln from -$54.0 in July.

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Stuart Cowell

Head Market Analyst

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