It’s Nonfarm Payrolls Day in the US!
The US economy returns to the spotlight at the end of this trading week, as the nonfarm payrolls report for October is scheduled to cross the wires later in the day. This crucial report provides a clearer snapshot of the US economy and could reinforce or undermine expectations for an interest rate rise by the Federal Reserve (Fed) at its December meeting. The nonfarm payrolls figure is anticipated to notch a 3-month high level, while the US jobless rate is seen edging lower to 4.9% from 5.0% in September.
The British economic calendar looks bereft of data today, as it seems to take a breather from “Super Thursday”. In the Euro zone, private sector activity registered a drop for October. On the other hand, German services purchasing managers’ index (PMI) surprisingly advanced during the same month.
Pound Sterling – UK Markets
It was a hat-trick of sorts for the Pound yesterday, after three major events helped the domestic currency surge to a 4-week high against the greenback. It all began with the release of Britain’s service sector activity index. The nation’s crucial services sector surprisingly advanced in October, notching its highest level since January this year, mainly driven by a strong expansion of incoming new businesses. After this, the Bank of England’s nine-member panel unanimously decided to hold the benchmark interest rate steady at 0.25%, after the British economy displayed unexpected resilience following the shock Brexit vote. There was a widely-held belief that the UK economy would slow dramatically after the June 23 vote. However, such an apocalyptic event is yet to materialise. Further, the central bank ramped up its near-term inflation and growth forecasts for the British economy.
Separately, the UK’s High Court ruled that the British government cannot trigger Article 50 without the Parliament's involvement. This led to hopes that the British Prime Minister, Theresa May will adopt a softer stance in Brexit negotiations.
US Dollar – US Markets
The greenback is trading mixed against the Pound and the shared currency this morning, with investors remaining cautious ahead of the release of key US employment data as well as mounting uncertainty over the outcome of the US Presidential election next week. Market participants will keenly watch US nonfarm payrolls and unemployment rate for further indications on the strength of the nation’s job market along with trade balance data, due later today.
The US Dollar ended broadly lower against its major counterparts yesterday, after the ISM service sector activity in the US fell more than expected in October. Despite the downbeat reading, it was still the 81st successive month of growth, signalling a likely continuation of modest growth in the final quarter. Data indicated that the final durable goods orders eased more than previous estimates in September. In other economic news, the number of Americans who filed for fresh unemployment benefits unexpectedly rose last week to its highest level since August, but remained in territory associated with a healthy labour market.
Euro – European Markets
The shared currency has extended its previous session losses against the greenback and the Pound this morning, after witnessing the release of downbeat final services PMI figures from across the Euro zone. The Euro region’s services PMI surprisingly declined in October. Also, business activity in the Euro zone last month was not as robust as shown in the flash estimate, thus further signifying that economic recovery in the 19-nation bloc is struggling to gain traction. Additionally, growth in France's dominant services sector slowed more than initially thought in October, as companies' efforts to slash prices failed to bring new business as the nation’s large hotel and restaurant sector suffered. Further, Italian and Spanish service sector activity also recorded a drop last month. Bucking the broader trend, German service activity unexpectedly rose in October, helping the nation’s private sector expand at its second fastest monthly rate this year.
Yesterday, the Euro zone’s unemployment rate remained steady at 10.0% in September, recording its lowest level in over five years.
Other Currencies – Highlights
The Swiss Franc is trading on a stronger footing against the US Dollar this morning. During the previous session, survey data from Switzerland’s State Secretariat for Economic Affairs showed that Swiss consumer confidence slightly improved in October, as an assessment of the nation’s general economic conditions came in better than the previous reading. However, the index has remained below its long-term average of -10 for over a year, as underlying caution persists.
In other economic news, Switzerland’s real retail sales improved on an annual basis in September. The pace of decline slowed for the third consecutive month. Further, the nation’s SVME PMI advanced more than expected in October. Today, trading in the US Dollar – Swiss Franc currency pair will be influenced by the release of some crucial data-points from the US. Market participants await the release of the
all-important US nonfarm payroll numbers. Looking ahead, a couple of macroeconomic data releases are due next week in Switzerland. These include the nation’s consumer price index and unemployment rate data, both for the month of October.