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Greenback Firm – All Eyes on Jobs Report and NFP Data

Currency-Market-Update-Friday-1
Albert Edwards
by Albert Edwards on October 04, 2019

CURRENCY MARKET UPDATE

U.S. Dollar highlights:

USD reached the highest level in seven weeks after lower oil prices and stock market selloff. After adding 135K jobs last month, markets are expecting a lower unemployment rate today for September to give USD more support. Global equities dropped while crude oil prices are lower due to signs of a slowdown in U.S. manufacturing. The ISM Non-Manufacturing Purchase Managers Index report decreased to 52.6 in September (from 56.4 in August and lower than expected 55.0). This represented the lowest reading since August 2016 as businesses are concerned about tariffs, labour resources and the economy. New order growth also dropped to a three-year low and the job creation pace was the weakest since February 2014. Meanwhile, initial jobless claims for last week was 219K (as expected and previously revised to 215K). Federal Reserve Chairman Jerome Powell also speaks today.

Canadian Dollar Highlights:

CAD has remained weak and vulnerable after U.S. equity markets dropped (increasing USD demand). Crude oil prices have been under pressure the past two weeks due to concerns of demand weakness. Inventories from the U.S. also increased for the third consecutive week. Global economic slowdown concerns and the U.S.-China trade war continues to affect CAD lower. Canada’s economy was flat in July (after four straight months of growth) as the mining, quarrying and oil and gas sectors contracted. The central bank remains patient regarding monetary policy and has kept interest rates stable; however, Governor Poloz may need to consider cutting rates to boost the economy.

Euro Highlights:

EUR defensive after the U.S. announced tariffs on $7.5 billion worth of European Union exports targeting aircraft, scotch, whiskey and agricultural items. The World Trade Organization authorized the U.S. to impose a 100% tariff on goods exported to the U.S. worth $7.5 billion annually. Meanwhile, Retail Sales for August increased 0.3% monthly and 2.1% yearly; however, Producer Prices dropped 0.5% monthly and declined 0.8% year over year. Germany’s PMI was the lowest since October 2012 as the Eurozone’s largest economy continues to suffer from Brexit uncertainty.

British Pound Highlights:

GBP firm on the possibility the European Union may grant another Brexit extension. Meanwhile, Prime Minister Boris Johnson wants the U.K. to leave the European on October 31 “deal or no-deal” and may not request another delay of Article 50. Johnson said his new Brexit proposal was a “final offer” and if rejected, GBP will suffer. The Parliamentary Act that outlaws a no-deal Brexit is currently protecting GBP from dropping lower. If a Brexit deal is reached, GBP will recover and rally; however, if Johnson does not reach an agreement by October 19, Brexit may be extended to January 31, 2020.

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