FOREX: Dollar May Retreat as US Jobs Growth Stokes Risk Appetite

2012-01-06 07:55:00 Ilya Spivak, Head Strategist, APAC

Talking Points

US Dollar May Pull Back as Jobs Report Stokes Risk Appetite
German Orders Data May Show Weaker Euro Helping Exports
Swiss Deflation to Deepen But Near-Term Intervention Unlikely
Australian Dollar Underperforms Amid Risk Aversion Overnight

The US Dollar (ticker: USDollar) continued to push higher overnight as Eurozone debt crisis fears weighed on Asian stock exchanges fell, stocking demand for the go-to safe haven currency. The MSCI Asia Pacific regional benchmark equity index lost 1.3 percent while the greenback gained as much as 0.2 percent having posted its strongest daily advance in nearly a month yesterday. The sentiment-linkedAustralian Dollar bore the brunt of the selloff – down as much as 0.6 percent against its US namesake.

Looking ahead, a lull in Eurozone debt crisis news shifts the spotlight to the outlook for global economic growth and the US Employment report. Expectations call for nonfarm payrolls to rise 155,000 in December, marking the largest jobs increase in three months. Absent an unexpected gloomy headline out of the currency bloc – such as the downgrade of a major European country like France, for example – this seems likely to boost risk appetite on hopes an accelerating recovery in the US will help offset the global economic slowdown expected this year. Such an outcome bodes ill for the safe-haven US Dollar against the stocks-correlated majors into the week-end, meaning the commodity bloc currency is likely to outperform while the Euro and the British Pound trail behind.

On the data front, German Factory Orders headline the docket in European hours. Expectations call for orders to fall 1.2 percent in the year through November, marketing the first negative reading in 25 months. The foreign demand component of the report ought to most interesting as traders gauge whether Euro weakness is helping to grow external demand, partially mitigating homegrown headwinds facing the Eurozone’s largest economy and the currency bloc at large.

Euro Zone Retail Sales are also on tap, with consensus forecasts pointing to the seventh consecutive month of contraction on the yearly reading. On balance, neither outcome offers anything particularly actionable in the immediate term and ought to pass with relatively little fanfare as the US jobs report looms ahead. Swiss Consumer Price Index numbers round out the docket, but deepening deflation seems unlikely to meaningfully boost Franc intervention expectations at least in the near term while SNB Chairman Philipp Hildebrand battles impropriety accusations amid reports his wife bought Dollars just three weeks before the central bank announced its EURCHF floor at 1.20, sending USDCHF soaring in the process.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
		No Data

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
8:00	CHF	Foreign Currency Reserves (CHF) (DEC)	-	229.3B	Medium
8:15	CHF	Consumer Price Index (MoM) (DEC)	-0.1%	-0.2%	Medium
8:15	CHF	Consumer Price Index (YoY) (DEC)	-0.6%	-0.5%	Medium
8:15	CHF	CPI - EU Harmonised (MoM) (DEC)	-	-0.4%	Low
8:15	CHF	CPI - EU Harmonised (YoY) (DEC)	-	-0.8%	Low
10:00	EUR	Euro-Zone Business Climate Indicator (DEC)	-0.48	-0.44	Low
10:00	EUR	Euro-Zone Consumer Confidence (DEC F)	-21.2	-21.2	Medium
10:00	EUR	Euro-Zone Economic Confidence (DEC)	93.3	93.7	Low
10:00	EUR	Euro-Zone Industrial Confidence (DEC)	-7.5	-7.3	Low
10:00	EUR	Euro-Zone Services Confidence (DEC)	-2.1	-1.7	Low
10:00	EUR	Euro-Zone Retail Sales (MoM) (NOV)	-0.4%	0.4%	Medium
10:00	EUR	Euro-Zone Retail Sales (YoY) (NOV)	-0.9%	-0.4%	Medium
10:00	EUR	Euro-Zone Unemployment Rate (NOV)	10.3%	10.3%	Medium
11:00	EUR	German Factory Orders s.a. (MoM) (NOV)	-1.8%	5.2%	Medium
11:00	EUR	German Factory Orders n.s.a. (YoY) (NOV)	-1.2%	5.4%	Medium