USD weaker as non-farm payrolls loom
The US dollar was mostly weaker overnight as markets looked ahead to tonight’s key US jobs report.
The US non-farm payrolls report is due at 12.30am AEDT with a recent weakening in labor numbers – including lower job openings and labor turnover (JOLTS) and ADP employment this week – causing markets to speculate that tonight’s number might also be weaker.
The market is looking for 180k new jobs with the unemployment rate forecast to stay steady at 3.9% (source: Refinitiv).
Yen surges on divergence worries
The Japanese yen has surged higher in recent days as markets become increasingly focused on the potential for policy divergence if the Bank of Japan is forced to tighten policy in 2024 as other major central banks consider rate cuts.
Today, we are looking for a decrease in grassroots sentiment in November 2023 (the current conditions DI). The Economy Watchers Survey’s current conditions DI is highly correlated with the Japanese composite PMI, which decreased from 50.5 in October to 50.0 (preliminary) in November. The manufacturing score decreased by 0.6 points to 48.1, while the services reading increased by 0.1 points to 51.7.
The manufacturing PMI showed a fall in both the production index and the new orders index. This points to slow production activity at manufacturers, which we believe will cause the corporate activity-related DI for the manufacturing industry to deteriorate month over month.
Oil tumbles
Oil has seen sharp losses recently despite upside risks to energy prices. Escalating geopolitical and economic tensions in the Middle East, OPEC+ cutbacks, the need to replenish the SPR, and high domestic Chinese energy demand might potentially create a soft bottom for Brent near $70/bbl.
That said, there is uncertainty surrounding depth of supply cuts by OPEC+ and markets shrugged off geopolitical events as immediate risks to supply. This has been weighing on oil sensitive currencies like CAD and NOK.
Greenback higher ahead of NFPs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 December
All times AEDT
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*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.
