USD edges higher ahead of jobs – Scotiabank

The US Dollar (USD) is tracking a little higher ahead of the US jobs report. After losing ground broadly on Thursday, markets baulked at pushing the USD more significantly lower (and through some key support points) ahead of the jobs data, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD broadly higher into the latest jobs report

“USD gains through the overnight session are concentrated in the AUD and NZD. Reports indicating that President-elect Trump had nominated David Perdue as his China ambassador may have weighed on sentiment for both. The CNY is down slightly on the session as well. But Perdue brings a lot of business experience in the region and a has taken a co-operative stance on China relations in the past. A solid rise in Japan’s base wage data in October boosted BoJ rate hike expectations but did nothing for the JPY which softened 0.3% on the session. Renewed volatility in the KRW overnight may be a factor in regional FX volatility.”

“In Europe, meanwhile, French assets continue to recover from this week’s chop; the CAC 40 is up 1.4% and OATs are outperforming Bunds by 3-4 bps. US Non-Farm Payrolls are expected to rebound from October’s soft 12k rise, with the street looking for a 220k gain, according to the Bloomberg consensus. The ‘whisper’ number is closely aligned with expectations (217k). There were significant downward revisions to the prior two months’ data with the October release (-111k), however, and an upward revision to the weather-affected October data will be expected today.”

“But another disappointing overall report will pose a challenge for Fed policymakers, some of whom have expressed concern about stalled progress on inflation in recent months. Swaps are pricing in 16-17bps of easing for this month’s policy decision currently. Beyond the data, the USD remains prone to some seasonal softness. A solid jobs report may lift the DXY back to the mid-106s. A disappointing outcome may drive the index towards support at 105.30.”