US Dollar slips ahead of key nonfarm payrolls report

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7 December 2018


The US Dollar was on the back foot again yesterday after a range of economic data releases boded ill for this afternoon’s key nonfarm payrolls report.

e think that risks to the strength of this afternoon’s labour report tilt somewhat to the downside following a number of underwhelming economic prints in recent days. Yesterday’s ADP employment change number, a decent gauge as to the strength of the headline nonfarm number, fell more-than-expected in November to 179,000 from 225k. Initial jobless claims also declined, while a number of indicators of consumer confidence have also eased back in the past few weeks.

Economists are currently pencilling in a 200k job creation number this afternoon, with the jobless rate and earnings growth number expected to remain unchanged. As always, we will look for any indication that multi-year low unemployment is filtering its way through to faster wage growth. That being said, even an underwhelming report would unlikely derail the Fed in its plans to hike interest rates again when it meets later this month.

Betting odds bleak ahead of parliamentary Brexit vote

Sterling was on course for its fourth consecutive week of losses against the US Dollar this morning, with Tuesday’s pending government vote heightening uncertainty over Brexit.

The odds remain heavily stacked against the Prime Minister in her quest to convince Tory rebels to back her agreement. Betting markets are currently placing a mere 15% probability that May’s vote passes and just a 50% chance that she will remain as PM when the UK officially leaves the EU at the end of March.

With all outcomes still on the table going into next week’s vote, volatility in the Pound is expected to remain sky-high. As we have mentioned in the past few days, we think that a move in Sterling of up to 4-5% in either direction cannot be ruled out following the outcome of the vote.

Eurozone economic growth slows to four year low

Macroeconomic news continues to disappoint in the Eurozone. This morning’s revised third quarter GDP growth numbers were revised even lower, suggesting that the ECB will likely adopt a dovish tone of communications during its monetary policy meeting next week.

The Eurozone economy expanded just 1.6% year-on-year in the three months to September, a downward revision from the 1.7% preliminary estimate. This marks its slowest pace since late-2014. While we expect the ECB to confirm it will be ending its QE programme at the end of this month, such weak data ensures that the slight possibility of an extension in asset purchases cannot be entirely ruled out.