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US Dollar May Not Find Potent Driver in Payrolls Data

US Dollar May Not Find Potent Driver in Payrolls Data

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar May Not Find Potent Driver in November’s Employment Data
  • Risk Sentiment Trends May Shape Markets’ Response to US Jobs Report
  • Track Trends and Find Turning Points for FX Majors with DailyFX SSI

A relatively uneventful economic calendar in European trading hours is likely to see traders looking ahead to November’s US Employment report. Expectations call for a 200,000 increase in nonfarm payrolls, marking a bit of a slowdown from the 271,000 gain recorded in the prior month. The jobless rate is seen holding unchanged at 5 percent. Average hourly earnings figures will also command attention considering the Fed’s struggle to bring inflation back toward 2 percent. On this front, forecasts for print at 2.3 percent year-on-year, marking a slight slowdown from the 2.5 percent outcome in October.

In practical terms, this round of jobs data may prove to be a less potent driver of the Fed outlook and the US Dollar than previous outings. Traders have become increasingly convinced that Janet Yellen and company will issue a rate hike at this month’s policy meeting. Indeed, Fed Funds futures now put the probability of a 25 basis point increase at 79 percent, a year-to-date high. FOMC officials have paid a great deal of lip service to the likelihood of this outcome, so it would probably take a truly staggering disappointment to alter their calculus and delay “liftoff”.

On the other hand, pricing in a substantially steeper rate-hike cycle before hearing from the FOMC would likely require an especially dramatic upside surprise. On balance, this means the path of least resistance favors the status quo, and thereby limited follow-through on whatever knee-jerk volatility will emerge immediately after the release.

Policy bets aside, the release may have market-moving potential from a sentiment perspective. Looking at the outcome through this prism, a soft result that keeps Fed rate hike bets intact may spur fears that US growth is an insufficient counterweight to weakness in the Eurozone and China, undermining risk appetite. That may punish higher-yielding FX like the Australian and New Zealand Dollars while boosting the safety-linked Japanese Yen. A strong result might establish a narrative of US resilience even as tightening looms ahead, producing the opposite dynamic.

Losing Money Trading Forex? This Might Be Why.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

00:00

NZD

ANZ Commodity Price (NOV)

-5.6%

-

7.1%

00:30

AUD

Retail Sales (MoM) (OCT)

0.5%

0.4%

0.4%

01:30

JPY

Labor Cash Earnings (YoY) (OCT)

0.7%

0.5%

0.4%

01:30

JPY

Real Cash Earnings (YoY) (OCT)

0.4%

-

0.3%

05:00

JPY

Consumer Confidence Index (NOV)

41.7

41.5

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

07:00

EUR

German Factory Orders (MoM) (OCT)

1.2%

-1.7%

Medium

07:00

EUR

German Factory Orders (YoY) (OCT)

-2.5%

-1.0%

Medium

08:15

CHF

CPI (MoM) (NOV)

0.0%

0.1%

Medium

08:15

CHF

CPI (YoY) (NOV)

-1.3%

-1.4%

Medium

08:15

CHF

CPI - EU Harmonized (MoM) (NOV)

-

0.0%

Low

08:15

CHF

CPI - EU Harmonized (YoY) (NOV)

-

-1.2%

Low

08:30

EUR

Markit Germany Construction PMI (NOV)

-

51.8

Medium

09:00

GBP

New Car Registrations (YoY) (NOV)

-

-1.1%

Low

09:10

EUR

Markit Germany Retail PMI (NOV)

-

52.4

Medium

09:10

EUR

Markit Eurozone Retail PMI (NOV)

-

51.3

Medium

09:10

EUR

Markit France Retail PMI (NOV)

-

51.9

Low

09:10

EUR

Markit Italy Retail PMI (NOV)

-

48.8

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

0.9901

1.0358

1.0649

1.0815

1.1106

1.1272

1.1729

GBP/USD

1.4561

1.4815

1.4980

1.5069

1.5234

1.5323

1.5577

--- 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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