Dollar: Can the NFPs Salvage a Tentative Breakdown?
Having loitered at a multi-month level of support, the Dow Jones FXCM Dollar (ticker = USDollar) finally made a conspicuous, bearish break this past session. That is a troubling move ahead of Friday's closely-watched January NFPs release. Where the scenarios for the labor report in previous months may have leaned in favor of a bullish interpretation for the greenback - as it would weigh on the speculation of the eventual Taper - we have seen the market's interest in the Fed's QE wind-down fade since they made their first definitive move back on
Now engaged in the very early stages of a 'tightening' phase (trimming the growth of the balance sheet rather than shrinking it), the Fed's policy path is a heavy contrast to many of its largest counterparts. Beyond the general assessment of a currency that is not engaging in the relative monetary policy scuffle (a polite term for 'currency war'), the bullish implications of a differing policy view shape rate forecasts and influence market-based yields. Consequently, overnight index swaps are pricing in 31 bps worth of expected tightening from the central bank by next February - the most hawkish the market has been since
Yet, despite the change in a five-year trend of steadily escalating stimulus from the US policy authority, the market either considers the advantage too modest or is otherwise too distracted to base its bearings on the consideration. That can create trouble for the dollar with the release of the upcoming payrolls. Though the data is unlikely to change the
Euro Rallies After the ECB Holds Monetary Policy Unchanged
Policy officials with the
British Pound Steady Through BoE Decision, Bigger Moves Ahead
As expected, there were few surprises from the Bank of
Yen Crosses Rise on Risk, BoJ Official's Stimulus Threat
Global equities were on average in the green by more than 1.0 percent this past session. Furthermore, volatility measures dropped sharply (the VIX dropped 2.7 vols to 17.2 percent), denoting a sharp taming of fear. With risk aversion that destabilizes the steady long yen-cross trade easing, the market is willing to front-run the BoJ - though not necessarily feed the tepid carry.
Canadian Dollar Looks to Strong Arm USDCAD Reversal on Jobs Data
Taking advantage of the US dollar's recent weakness, USDCAD is working on a reversal from its multi-year peak set last week. The Canadian dollar will take some of the responsibility for this move into its own hands this upcoming session with the release of local employment figures. In contrast to the massive 45,900-net jobless reported in December, the forecast is for a 20,000-net increase for January figures.
Australian Dollar Unable to Maintain Advance After RBA Report
The 12-month interest rate forecast for the RBA priced through swaps is at a two-month high 18 bps; and the Australian 2-year notes yield has surged 9.3 percent from this week's low to 2.83 percent. The rate outlook is improving. So then why is the Aussie dollar sliding this morning. The RBA Monetary Policy report upgraded growth and inflation forecasts - but the outlook was heavily contingent on a further weakening A dollar.
Emerging Markets Capital Finally Rebound Alongside Currencies
The majority of the Emerging Market currency world posted gains against the safe haven dollar this past session, but the real improvement comes via the group's capital markets. The MSCI Emerging Market ETF cleared 38.00 Thursday for the first meaningful move higher since early January. The persistence of this move depends heavily on a continued deflation of volatility pressure in broader financial markets.
Gold's NFP Potential Skewed to the Bearish
Running through the same NFP scenarios we would consider for the dollar, there is significantly less scope for gold to gain traction. A risk bounce and acclimation to Taper by the equities market significantly curbs the extreme safe haven appeal that the metal has already struggled to portray. Alternatively, a weak data showing is unlikely to stall the Taper outlook. Gold's best bet is simply for a dollar tumble Friday.
Leading Index (DEC P)
The last Leading Index print was the best since 2007.
Coincident Index (DEC P)
German Trade Balance (euros) (DEC)
German imports saw a downward revision for November from -1.1% to -2.3%.
German Current Account (euros) (DEC)
German Exports s.a. (MoM) (DEC)
Foreign Currency Reserves (JAN)
The figure has been relatively flat since the 2012 jump in EUR/CHF off the 1.20 floor.
Retail Sales (Real) (YoY) (DEC)
Prior print was the highest since early 2013.
Visible Trade Balance (Pounds) (DEC)
Industrial Production YoY figures hit 2.5 year highs over the past few months, but strong data continues to have less of an impact on GBP strength after its huge run.
Trade Balance Non EU (Pounds) (DEC)
Total Trade Balance (Pounds) (DEC)
Industrial Production (MoM) (DEC)
Industrial Production (YoY) (DEC)
Manufacturing Production (MoM) (DEC)
Manufacturing Production (YoY) (DEC)
German Industrial Production s.a. (MoM) (DEC)
Although key data for insight into
German Industrial Production n.s.a. and w.d.a. (YoY) (DEC)
Net Change in Employment (JAN)
Data out of
Unemployment Rate (JAN)
Full Time Employment Change (JAN)
Part Time Employment Change (JAN)
Participation Rate (JAN)
Change in Non-Farm Payrolls (JAN)
Market participants will be looking for an upward revision in last month's 74K figure as well as a strong print here if USD strength is to hold, especially against the Yen.
Unemployment Rate (JAN)
Labor Force Participation Rate (JAN)
Underemployment Rate (JAN)
Change in Private Payrolls (JAN)
Change in Manufacturing Payrolls (JAN)
Two-Month Payroll Net Revision (JAN)
Change in Household Employment (JAN)
Average Hourly Earnings (MoM) (JAN)
Average Hourly Earnings (YoY) (JAN)
Average Weekly Hours (JAN)
Consumer Credit (DEC)
Figure has slowed since October.
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