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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

GMT

CCY

EVENT

ACT

EXP

PREV

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

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

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

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0746

1.0809

1.0846

1.0872

1.0909

1.0935

1.0998

GBPUSD

1.4878

1.5075

1.5141

1.5272

1.5338

1.5469

1.5666

--- 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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