The Currency Market is Turbulent with US Jobs Data, FedListens and Political Tension

. 4 min read

Overview:

  • The US non-farm payroll numbers weren't as strong as forecast, but a new record low unemployment watermark has been reached
  • Currency investors should look to listen in to Fed Chair Powell's speech if it's not on their calendar already
  • Reception of PM Johnson's revised Brexit separation plan has been tepid at best

Highlight:

At 2 PM ET, investors will also tune in to Fed Chair Powell’s speech at the #FedListens online event. He is expected to share the Fed’s “Perspectives on Maximum Employment and Price Stability” and based on his comments, we expect the market to see some volatility. In the meantime, gold ($1510/oz) continues to add to gains, trading higher for the fourth consecutive session while crude oil futures prices have steadied around a two-month low.

The market is currently assessing the latest employment report from the US Bureau of Labour Statistics: The unemployment rate fell to 3.5% last month, the headline number was at 136k missing market estimate whilst there were upward revisions for the last two months.

US DOLLAR

The US dollar is trading heavily against its major peers as the Japanese Yen strengthens against a backdrop of soft global economic data. The US Dollar Index is down 0.1%.  The ISM Non-Manufacturing survey (52.6) missed the market’s estimates yesterday and was 3.8% points below the August reading of 56.4. today, the focus turns naturally to non-farm employment data.

The latest report from the Bureau of Labour Statistics showed job growth rising by 136,000 last month and the unemployment rate declining to 3.5%. The market is currently digesting the incoming news and any signs of weakness will ignite concerns that there are more issues under the economic hood.

BRITISH POUND

Brexit continues to dominate the headlines and various sources are reporting mixed feelings about PM Johnson’s UK-EU divorce plan. He seems to have outside support from party hardliners at home whilst the EU believes work still needs to be done on “problematic points”.  With the Brexit cliff date of October 31st just around the corner, there is likely going to be a scramble to have some sort of arrangement in place before they cross the line. At worst, PM Johnson will have to request another extension. As a result, trading in Sterling remains choppy with wide swings expected between 1.22 and 1.24 range.

EURO

The shared currency bounced back from a 2 ½ year low against the greenback, mostly as a result of broad-based USD weakness.  The threat of new trade tariffs on EU imports by the US is stoking fear of a global meltdown. We, however, expect any upside movement to be limited in the medium term. The economic situation in the Eurozone is hardly impressive and investors will be wary of US tariffs on EU products coming into effect in 14 days.

CANADIAN DOLLAR

The USDCAD is holding onto its gains north of the 1.33 handle after breaking the recent 1.32 -1.33 trading range. There is little in terms of local data which will impact the pair today. Hence, we expect the CAD to be driven exclusively by outside factors and broader market risks. Fed Chair Powell’s speech could, however, inject some trading impetus.

AUSTRALIAN DOLLAR

It has been a quiet day for AUD USD, but the week has been positive overall. 0.67665 isn't bad considering where the Aussie was on Tuesday.

FEATURED CURRENCY

The greenback has recorded a drop from the peak of around JPY 108.50 to the midpoint of 106 on the back of soft economic data across the world. USD/JPY remains inside yesterday’s range for now.

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