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Will NFPs Distract Enough from Elections to Charge Dollar?

Will NFPs Distract Enough from Elections to Charge Dollar?

John Kicklighter, Chief Strategist

Talking Points:

  • October NFPs are due Friday at 12:30 GMT with an economist forecast of 173,000 jobs added
  • The US Presidential Election is a strong distraction on the markets and can throttle risk impact
  • While US political risk can distract the Dollar, speculation of a Dec 14th hike will resume

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It's that time of the trading month again: US nonfarm payrolls (NFPs) are due. This is one of the most consistently market-moving indicators across the global docket, but its leverage may be undermined with this month's release. There is a very prominent fundamental distraction in the financial markets in the impending US Presidential Election next Tuesday. The narrowing of polls has increased the anxiety over the event and its impact on the markets. That diversion will impede the employment report's influence significantly...but not completely. We discuss what aspects to watch in this report both in the short and medium-term.

Heading into the October jobs release, it is less likely that the Dollar will respond with a change in its monetary policy advantage unless there is an exceptional surprise. While relative policy bearing has proven one of the most prominent motivators over the past months, it is a subtle consideration compared to the intensity of risk speculation. Instead, the short-term reaction will likely be felt on the sentiment front. If the jobs figures are remarkably better or worse than expected, it can factor into voters assessment of the economy as they head into the polls. Also, as wound up as the markets are, it wouldn't be difficult to trigger volatility - though trend is another matter altogether.

While the probability of a December 14th FOMC rate hike is relegated to the backdrop now; after the election is over, it will once again be a critical consideration for the Dollar's standing and sentiment tied to central bank support. The probability of a rate hike before the end of the year still stands around 80 percent, yet the Dollar has not benefit from these hawkish winds recently. Should the jobs figures alter the probabilities - hawkish or dovish - for the year-end move, the markets will likely return to that shift later next week. We discuss the importance of and distortions for the NFPs in today's Strategy Video.

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Will NFPs Distract Enough from Elections to Charge Dollar?

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