Spotlight on US Nonfarm Payrolls Report
Today, markets await the main highlight of the day – the US nonfarm payrolls report. Expectations are for the US labour market to show a rise in jobs creation for November, albeit slightly lower than October’s surprise surge and the unemployment rate to remain steady. Today’s job market update will be the last major data print before the Federal Reserve’s (Fed) next interest rate setting meeting later this month. However, today’s publications from the US are unlikely to budge expectations of a December rate rise.
Yesterday’s disappointing European Central Bank (ECB) stimulus measures triggered a significant rally in the Euro against the major currencies. Meanwhile, currency traders paid little attention to the only key data in today’s European economic calendar, which showed that German factory orders strongly rebounded in October.
Pound Sterling – UK Markets
Yesterday, the Pound dived against the Euro as global markets reacted to news that the ECB had decided to slash its deposit rate and broadened its asset purchase programme to include regional debt. Though investors were disappointed by the underwhelming set of stimulus measures by the ECB, the currency pair shot up above the 0.72 mark after the announcement. On the other hand, the Pound traded higher against most of the other major currencies in the wake of better than expected services output in the UK. The closely monitored survey on Britain’s services sector brought in the much needed relief around the turn of the year. UK’s service industry which is the main driver of nation’s economic growth overshadowed faltering manufacturing and construction activity growth for November, thus reigniting views that the economy would strongly recover in the fourth quarter.
This morning, Sterling has partly recovered from its previous session losses against the Euro. However, the outlook for Sterling is still a little bearish today in the absence of key UK data and amid the release of crucial US jobs report later today.
US Dollar – US Markets
The greenback has recovered from most of its losses against the Euro this morning as investors await the US November employment report given heightened expectations that the Fed will likely raise interest rates for the first time in nearly a decade in just two weeks time. In October, markets were pleasantly surprised after the numbers of jobs created in non-agricultural businesses were the largest since December 2014. Today’s jobs report will be the last one the Fed sees before the crucial rate setting meeting. Even if hiring slightly declines for November, the Fed would not likely be dissuaded from its current rate stance given the significant improvement the job market has shown in recent years. The Fed Chief, Janet Yellen, yesterday stated that the US labour market should soon reach full health if the economy continues to grow at its current pace. She also added that more hiring and better pay could push the inflation back to the Fed’s target in near future.
As markets get ready for the November job issue, investors will also look for any modest pay gains and unemployment rate to gauge the strength of the US labour market.
Euro – European Markets
This morning, the shared currency has pared some of its yesterday’s gains against the US Dollar. The currency pair had yesterday witnessed its largest single day gains since 2009. The Euro rallied soon after the ECB announced its decision to cut its deposit rate while maintaining the size of the central bank’s asset purchase programme and merely expanded the maturity to the end of March 2017. Investors were largely disappointed by the not so dovish stance of the ECB. Nevertheless, the measures still ease monetary policy significantly and highlight the ECB’s continued efforts to spur growth and boost inflation in the 19-nation currency union. Moving ahead, the Euro – US Dollar currency pair could further descend in negative territory in the upcoming session if the US non-farm payrolls and wage growth data scheduled later in the day undermine market expectations for a Fed rate rise this month.
Earlier today, German factory orders rose after three consecutive monthly declines and topped market estimates for October after demand in the Euro area markedly picked up, suggesting continued recovery in the Euro region.
Other Currencies – Highlights
The Canadian Dollar is trading in a narrow range against the greenback this morning. However, this range could widen in the session ahead following the release of US and Canada employment figures which could trigger volatility in trading in the currency pair. Markets anticipate that Canada’s November issue of labour force survey will show a drop in jobs as the nation’s energy sector continued to make sweep cuts to improve results. On the other hand, Canada’s jobless rate is projected to remain steady for November. However, the US non-farm payrolls report will take the limelight as the US Fed is estimated to increase its benchmark interest rate for the first time since June 2006, in its 15-16 December monetary policy meeting. Expectations are for the US labour market print to show fewer additions of jobs than what was witnessed in the previous month.
Also as Canadian economy is largely dependent on its oil sector, today’s Organisation of the Petroleum Exporting Countries (OPEC) meeting in Vienna could impact trading in the Loonie against the US Dollar.