US Dollar Response to Jobs Data May Be Clouded by Risk Trends
- US Jobs Data May Top Forecasts, Boosting December Fed Rate Hike Bets
- Risk Trends May Obscure US Dollar Response to Upbeat Payrolls Figures
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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.
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|22:30||AUD||AiG Perf of Construction Index (OCT)||52.1||-||51.9|
|00:30||AUD||RBA Statement on Monetary Policy||-||-||-|
|05:00||JPY||Leading Index CI (SEP P)||101.4||101.8||103.5|
|05:00||JPY||Coincident Index (SEP P)||111.9||112.1||112.2|
|05:30||AUD||Foreign Reserves (A$) (OCT)||64.3B||-||72.7B|
|07:00||EUR||German Industrial Production (MoM) (SEP)||0.5%||-1.2%||Medium|
|07:00||EUR||German Industrial Production (YoY) (SEP)||1.3%||2.3%||Medium|
|08:00||CHF||Foreign Currency Reserves (OCT)||-||541.4B||Low|
|09:30||GBP||Industrial Production (MoM) (SEP)||-0.1%||1.0%||Medium|
|09:30||GBP||Industrial Production (YoY) (SEP)||1.3%||1.9%||Medium|
|09:30||GBP||Manufacturing Production (MoM) (SEP)||0.6%||0.5%||Medium|
|09:30||GBP||Manufacturing Production (YoY) (SEP)||-0.7%||-0.8%||Medium|
|09:30||GBP||Visible Trade Balance (£,Mn) (SEP)||-10600||-11149||Medium|
|09:30||GBP||Trade Balance Non EU (£,Mn) (SEP)||-3100||-3765||Low|
|09:30||GBP||Trade Balance (£,Mn) (SEP)||-3000||-3268||Low|
|CCY||Supp 3||Supp 2||Supp 1||Pivot Point||Res 1||Res 2||Res 3|
--- 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.