U.S. Dollar Highlights:
USD strengthened after September’s unemployment rate decreased to 3.5% (previously 3.7% in August). Markets expected the jobless rate to remain the same and this represented the lowest rate since December 1969. Meanwhile, nonfarm payrolls increased by 136K last month (lower than expected 145K previously revised to 168K). Markets remain concerned that contraction in both the manufacturing and service sectors could foreshadow a slowdown. Tariffs, geopolitical concerns and central bank monetary policy currently weighing on USD. Federal Reserve Chairman Powell speaks today and the focus this week will be on FOMC meeting minutes (Wednesday) and trade talks resuming (Thursday and Friday).
CAD firm after oil prices rallied and the trade deficit narrowed in August. After data confirmed an increase in U.S. crude inventories last week, markets are concerned about oversupply. Both imports and exports increased but oil prices remain volatile due to fears that slower global growth will also lower the demand for energy. All eyes on the Unemployment Rate for September (available Friday).
EUR stable after U.S. nonfarm payrolls disappointed and chances of another Brexit delay are increasing. EUR received some support after German Foreign Minister Heiko Maas said the European Union will retaliate to the new U.S. tariffs on European goods. Markets will continue to focus on Brexit developments this week for EUR direction.
GBP defensive due to increased concerns that a Brexit deal will not be finalized at the European summit later this month. The British government proposed an all-island regulatory zone in Ireland to cover all goods (and to replace the current backstop agreement). However, European Parliament President Sassoli has rejected the proposal; meanwhile, markets are expecting a no-deal Brexit or deadline extension until January 31, 2020. All eyes this week will be on Bank of England Governor Mark Carney’s speech tomorrow and August GDP (available Thursday).