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Summary: Welcome to Payrolls Friday! As my fingers hit the keyboards while my brain contemplates Friday, Payrolls Day. Ringing in my head is the tune of Phil Collins’ 1989 hit tune, “Just Another Day in Paradise”. Indeed, its just another day for you and me in FX land. Ahead of what is anticipated to be an upbeat September Payrolls report. Median forecasts are for a Jobs Creation number between 490,000 to 500,000, from 235,000 in August, and the Unemployment Rate to fall to 5.1% from 5.2%. Yesterday’s sharp fall in the Weekly Jobless Claims to 326,000 from a previous 362,000 that beat expectations of 350,000 was the catalyst for a solid Employment report tonight. A Reuters report added that the number of people on state unemployment rolls plunged to an 18-month low in September. US lawmakers agreed to extend the country’s Debt Ceiling by USD 408 billion to early December which added to the market’s improved risk sentiment.
The Dollar Index (USD/DXY), which is a popular measure of the Greenback’s value against a basket of 6 major currencies was little changed, settling at 94.20 from 94.22 yesterday. Risk leader, the Australian Dollar outperformed, jumping 0.42% above the 0.7300 threshold to 0.7312 (0.7275 yesterday). Canada’s currency, the Loonie was next best performer against the Greenback after Canadian IVEY PMI (a diffusion index of purchasing managers) soared to 70.4 in September (from 66.0 in August), beating estimates at 60.5. Against the US Dollar the Canadian Loonie finished at 1.2547 (1.2588), a gain of 0.36%. The Kiwi (NZD/USD) rebounded from its opening yesterday of 0.6915 to 0.6933, up 0.25%. The Euro extended its lacklustre performance dipping to 1.1553 (1.1560 yesterday). Germany’s Industrial Production in September plunged to -4.0% from +1.3% in August, underwhelming forecasts at -0.4%. The USD/JPY pair edged higher to 111.61 (111.38) on the market’s improved risk appetite. Emerging Market and Asian Currencies saw modest gains versus the Greenback. The USD/CNH (Dollar-Offshore Chinese Yuan) pair was last at 6.4525 from 6.4545, while USD/SGD (US Dollar-Singapore Dollar) closed at 1.3583 (1.3590 yesterday).
Wall Street stocks rebounded. The DOW finished up 1.03% to 34,797 (34,435) while the S&P 500 rallied to 4,403 from 4,365 for a gain of 0.82%. Global bond yields rose. The US 10-year Treasury note rate settled at 1.57% (1.53%). Germany’s 10-Year Bund Yield was last at -0.19% (-0.18%). Canadian 10-year Treasuries yielded 1.56% at the close, against 1.50% yesterday.
Data released yesterday saw Japanese Leading Economic Indicators for August at 101.8% from a previous 104.1%, and forecasts of 102.0%. Switzerland’s September Unemployment Rate matched expectations at 2.8%. UK Halifax House Price Index rose to 1.7% from 0.3%, beating forecasts at 1.3%. Italy’s August Retail Sales rose to 0.4%, bettering estimates at 0.2%.
On the Lookout: Welcome to Payrolls Friday once again. Its all about the Jobs Creation number which is released later tonight. US Jobs Creation is expected to show an improvement from August’s weak 235,000 number. Which was the fewest in seven months. Jobs creation estimates centre around +500,000. Economists expect the Unemployment rate to dip to 5.1% from 5.2%. Other data released prior to the US Payrolls kick off in Asia with Japan’s Annual Average Cash Earnings for August (m/m f/c -2% from previous -0.9%, y/y f/c -1.5% from previous 0.7% - ACY Finlogix). Japan’s August Current Account follows (f/c +JPY 1540.9 billion from previous +JPY 1910.8 billion – ACY Finlogix). Australia follows with its August Final Building Approvals (m/m f/c 6.8% from -8.6% - ACY FInlogix). Australia’s RBA releases its Financial Stability Review, an assessment of conditions in the financial system (12.30 pm Sydney time). China follows with its September Caixin Services PMI (f/c 49.3 from 46.7). Japan rounds up Asian reports with its September Economic Watchers Sentiment Survey. European data start with Germany’s August Trade Balance – Surplus (f/c +EUR 15.8 billion from previous +EUR 17.9 billion). Canada kicks off North American data with it’s September Employment Change (f/c from 59,500 to 65,000 from previous 90,200), and Canadian September Unemployment Rate (f/c 6.9% from 7.1%). The US reports its September Non-Farms Employment Change (Payrolls – f/c 500,000 from August 235,000 – ACY Finlogix), US September Unemployment Rate (f/c 5.1% from 5.2% - ACY Finlogix), and US Average Hourly Earnings (Wages –m/m f/c 0.4% from 0.6%). US August Final Wholesale Inventories round up the day’s reports (f/c 1.2% from 1.2%).
Trading Perspective: it’s all about tonight’s Payrolls numbers and unless we get an extremely bad report, the US Dollar will remain supported. A bad number would be for the Jobs Creation or Payrolls number to be less than 400,000. And a Jobless number of over 5.3%, say 5.4% to 5.5%. With the speculative trading community long of USD bets, this could a huge shakeout. Risk currencies like the Aussie would plunge, despite a lower Greenback. The USD/JPY pair would also fall.
A number which is close to expectations would see the Dollar trade in familiar ranges against its various rivals. The risk currencies, led by the Aussie would maintain FX dominance. Keep an eye out on treasury bond yields as well.
A strong US jobs creation number of +600,000 or higher would see the USD spike higher against its Rivals. The USD/JPY pair would lead the USD higher.
Welcome to another Friday Payrolls Day in FX land. Just another day in FX…Tin helmets on for tonight folks… let’s get ready to rumble! Happy Friday, happy days!
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