Forex: Markets Mark Time as All Eyes Turn to US Jobs Data

Talking Points

• FX Markets Consolidated in Asian Hours as Traders Waited for US Employment Data
• NFP Print Important for Fed Outlook Despite Omission of US Government Shutdown
• US Dollar to Interpret Jobs Report in Terms of Timing First “Tapering” of QE Effort

The major currencies oscillated in quiet overnight trade as investors awaited the much-anticipated release of September’s US Employment report. Expectations suggest the economy added 180,000 jobs from the previous month, topping the 169,000 increase recorded in August. The unemployment rate is expected to hold unchanged at 7.3 percent.

The markets are likely to interpret the result in terms of its implications for Federal Reserve policy expectations.Although the figures are dated in that they won’t reflect the impact of October’s US government shutdown, they will help establish whether the economy appeared resilient enough to “taper” QE asset purchases relatively soon before fiscal headwinds intensified.

With that in mind, a strong reading is likely to suggest the expected timing of the first cutback in stimulus can be brought closer into the near term from the March time frame now penciled into median forecasts (according to a survey from Bloomberg). Such an outcome stands to broadly boost the US Dollar against its top counterparts. A soft result will probably yield the opposite effect.

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

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