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Forex Analysis: Dollar to Rise if US Jobs Data Tops Expectations

Forex Analysis: Dollar to Rise if US Jobs Data Tops Expectations

Ilya Spivak, Head Strategist, APAC

The Dollar is likely to rise if US jobs data tops economists’ expectations, bolstering bets for an early end to the Federal Reserve’s stimulus efforts.

Talking Points

  • Yen Drops as Japanese Stocks Play Catch-Up to “Fiscal Cliff” Deal Rally
  • US Jobs Report May Fuel Dollar Rally After Fed Outlines QE Exit Strategy
  • Euro at Risk as Eurozone CPI, PMI Data Drives ECB Rate Cut Expectations

The Yen slumped overnight as Japanese stock markets reopened to a sharp rally. Investors got their first opportunity to react to news of the deal averting the US fiscal cliff earlier in the week, denting demand for the safe-haven currency. The US Dollar continued to advance in the wake of minutes from December’s FOMC meeting that showed the Federal Reserve adopting a somewhat less dovish posture (as expected) and hinting it may end asset purchases as early as this year.

Looking ahead, all eyes are on December’s US Employment report. Expectations call for nonfarm payrolls to rise 153,000 compared with an increase of 146,000 in the prior month. The ISM Non-Manufacturing Composite reading as well as November’s Factory Orders data are also on tap. With the Fed having defined a clear framework for forecasting the path of monetary policy, there is now scope for the greenback to trade in direct response to US economic data rather than in terms of its implications for risk trends. On balance, this means better-than-expected results can be expected to boost the Dollar, and vice versa.

December’s preliminary Eurozone CPI reading headlines the docket in European hours. Economists expected the year-on-year inflation rate to print lower at 2.1 percent, marking the lowest print in over two years. The outcome may weigh on the Euro as easing price growth combined with sluggish economic performance and the erosion of the sovereign risk premium in periphery bond yields give scope for ECB stimulus. The final revision of December’s Eurozone Composite PMI is also on tap, with a lower than expected outcome possible after the manufacturing component disappointed earlier in the week.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

AUD

AiG Performance of Service Index (DEC)

43.2

-

47.1

1:45

CNY

HSBC Services PMI (DEC)

51.7

-

52.1

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German Retail Sales (MoM) (NOV)

0.8%

-1.3%

Medium

7:00

EUR

German Retail Sales (YoY) (NOV)

-1.6%

-0.8%

Medium

7:45

EUR

Italian PMI Services (DEC)

45.0

44.6

Low

8:50

EUR

French PMI Services (DEC F)

46.0

46

Low

8:55

EUR

German PMI Services (DEC F)

-

52.1

Medium

9:00

EUR

Euro Zone PMI Composite (DEC F)

47.3

47.3

Medium

9:00

EUR

Euro Zone PMI Services (DEC F)

47.8

47.8

Medium

9:30

GBP

M4 Money Supply (MoM) (NOV)

-

0.2%

Low

9:30

GBP

M4 Money Supply (YoY) (NOV)

-

-3.2%

Low

9:30

GBP

M4 Ex IOFCs 3M Annualised (NOV)

-

5.40%

Low

9:30

GBP

Official Reserves (Changes) (DEC)

-

$44M

Low

9:30

GBP

PMI Services (DEC)

50.2

50.2

Medium

9:30

GBP

Net Consumer Credit (NOV)

0.0B

-0.5B

Low

9:30

GBP

Net Lending Sec. on Dwellings (NOV)

0.5B

0.2B

Low

9:30

GBP

Mortgage Approvals (NOV)

54.0K

53.0K

Medium

10:00

EUR

Euro Zone CPI Estimate (YoY) (DEC)

2.1%

2.2%

High

10:00

EUR

Italian CPI (NIC incl. tobacco) (MoM) (DEC P)

0.2%

-0.2%

Low

10:00

EUR

Italian CPI (NIC incl. tobacco) (YoY) (DEC P)

2.3%

2.5%

Low

10:00

EUR

Italian CPI – EU Harmonized (MoM) (DEC P)

0.2%

-0.3%

Low

10:00

EUR

Italian CPI – EU Harmonized (YoY) (DEC P)

2.4%

2.6%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2952

1.3144

GBPUSD

1.5988

1.6211

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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