Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback eases ahead of US jobs
The US dollar neared four-week lows overnight as markets turned cautious ahead of tonight’s all-important US jobs report.
The USD index dropped 0.5% with the benchmark basket nearing the lowest level since 12 November.
In other markets, the AUD/USD gained 0.4% and NZD/USD climbed 0.6%.
In Europe, the EUR/USD outperformed, up 0.7%, despite French political turmoil.
Across Asia, USD/SGD fell 0.4% while the USD/CNH extended recent losses from one-year highs for a second day, with a 0.2% loss.
Tonight, the US dollar’s fate will likely be driven by the November jobs report. Financial markets are looking for 220k new jobs in November after the 12k hurricane-affected number in October. A weaker number might see the USD fall further, however, and could drive FX market volatility.
The US jobs report is due at 12.30am AEDT.
Euro jumps despite political turmoil
French Prime Minister Michel Barnier was ousted following a vote of no confidence on Wednesday.
Until President Emmanuel Macron appoints a new prime minister, the current government will continue in a caretaker role.
Macron is now under intense scrutiny, with a recent poll revealing that 63% of French voters believe the President should step down voluntarily if the government collapses. Overnight, however, Macron said he would stay on as president until 2027 and would appoint a new prime minister in “coming days”.
While the euro tumbled post the US election, the single currency is showing remarkable resilience despite French political turbulence.
As per below, simple regression of various indicators point to potential EUR strength later down the road.
The euro was strongly higher with the AUD/EUR now down 2.3% from last month’s 18-month highs with the 0.6200 clearly seen as key resistance. EUR/SGD is up 1.5% from last month’s lows.
Softening Canadian labour market signals rate cuts
Also due tonight, Canadian unemployment rate is released at 12:30am AEDT.
The last major data point ahead of next week’s Bank of Canada decision, the November employment statistics has the potential for another dismal result that would confirm a further 50 basis point cut.
After better employment in September, we anticipate a very small 5K gain in employment, continuing a decreasing trend that started in October.
After a few months at 6.5%, this would raise the jobless rate to 6.7%. Only a drop in the labour force participation rate, which we anticipate will go sideways in November, was responsible for the unemployment rate’s recent stabilisation.
Even if average earnings may stay high at 4.7%, we still anticipate that a tightening labour market will eventually result in less pressure on wages.
The Canadian dollar has been mostly lower over the lasty few months although recent Aussie dollar losses have seen AUD/CAD hit six-month lows this week, finding support at the key 0.9000 level.
The USD/CAD faces next key resistance at 1.4178 – level not reached since April 2020.
Euro rebounds from recent lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 2 – 7 December
Have a question? [email protected]
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
