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US Dollar Response to Jobs Data May Be Clouded by Risk Trends

US Dollar Response to Jobs Data May Be Clouded by Risk Trends

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Jobs Data May Top Forecasts, Boosting December Fed Rate Hike Bets
  • Risk Trends May Obscure US Dollar Response to Upbeat Payrolls Figures
  • See Economic News Directly on Your Charts with the DailyFX News App

Currency markets are likely to look past second-tier event risk due to cross the wires in European hours, with all eyes focused on October’s US Employment data. An increase of 185,000 in non-farm payrolls is expected, while the jobless rate is seen edging down to a seven-year low of 5.0 percent. Also of note, the year-on-year growth rate in average hourly earnings is expected to rise to 2.3 percent, the highest in five months.

US news-flow has cautiously improved relative to expectations even as consensus forecasts trended lower since early October, suggesting the economy has broadly proven more resilient than analysts envisioned. This opens the door for an upside surprise. The markets’ initial reaction to such an outcome will probably reflect the most straight-forward interpretation, translating it to mean that a December Fed rate hike looks more likely and sending the US Dollar higher against most of its counterparts.

The implications for risk appetite trends are somewhat more complex. The markets have yet to decide whether upbeat US data is good or bad for sentiment. The former argument contends that signs of strength in the world’s largest economy bode well for global growth and so ought to boost risk appetite. The latter warns that figures encouraging the Fed to put the brakes on US growth are risk-negative against a backdrop of sluggish performance elsewhere.

On balance, this could make for seesaw volatility. If risk trends take over after the initial post-data reaction, scattered price action could follow. In the event of risk aversion, the Euro and the Japanese Yen may outperform while higher-yielding currencies like the Australian and New Zealand Dollars suffer. A swell in investors’ confidence stands to produce the opposite result.

Losing Money Trading Forex? This Might Be Why.

Asia Session

GMTCCYEVENTACTEXPPREV
22:30AUDAiG Perf of Construction Index (OCT)52.1-51.9
00:30AUDRBA Statement on Monetary Policy ---
05:00JPYLeading Index CI (SEP P)101.4101.8103.5
05:00JPYCoincident Index (SEP P)111.9112.1112.2
05:30AUDForeign Reserves (A$) (OCT)64.3B-72.7B

European Session

GMTCCYEVENTEXPPREVIMPACT
07:00EURGerman Industrial Production (MoM) (SEP)0.5%-1.2%Medium
07:00EURGerman Industrial Production (YoY) (SEP)1.3%2.3%Medium
08:00CHFForeign Currency Reserves (OCT)-541.4BLow
09:30GBPIndustrial Production (MoM) (SEP)-0.1%1.0%Medium
09:30GBPIndustrial Production (YoY) (SEP)1.3%1.9%Medium
09:30GBPManufacturing Production (MoM) (SEP)0.6%0.5%Medium
09:30GBPManufacturing Production (YoY) (SEP)-0.7%-0.8%Medium
09:30GBPVisible Trade Balance (£,Mn) (SEP) -10600-11149Medium
09:30GBPTrade Balance Non EU (£,Mn) (SEP) -3100-3765Low
09:30GBPTrade Balance (£,Mn) (SEP)-3000-3268Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.07461.08091.08461.08721.09091.09351.0998
GBPUSD1.48781.50751.51411.52721.53381.54691.5666

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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