Written by Steven Dooley, Head of Market Insights
Global overview
The US dollar continued to reverse from recent highs as bond yields also turned ahead of tonight’s critical US non-farm payroll report. The Aussie and kiwi both rebounded for a second day. Canadian jobs are also due with the CAD near a three-year low versus the US dollar.
USD reversal from highs continues
The US dollar extended this week’s decline overnight with bond yields falling further after reversing sharply at a 16-year peak.
The USD index fell from 10-month highs with the greenback’s weakness boosting key FX markets.
The AUD/USD gained 0.7% while the NZD/USD jumped 0.9%.
The USD/SGD fell 0.4% while the USD/CNY was flat.
US jobs key
The USD’s next move will likely be driven by tonight’s job report. In September, the market expects US non-farm payrolls to print 170k. The rate of employment growth is progressively slowing down, but last month there was one-off negative shock, ie a strike in the entertainment industry, which momentarily overestimated the deterioration.
After a significant increase in August, the unemployment rate probably decreased somewhat to 3.7%, as expected by the market. Although initial claims have decreased recently, suggesting fewer job losses, labor demand looks to be decreasing.
Canadian employment due as CAD hits lows
From Canada, following a rise of 39.9k jobs in August, the market expects a 20k job growth in September. The unemployment rate is predicted by the market to rise to 5.6%. Immigration, which supports both the labor force and population expansion, will probably result in a higher participation rate.
As has been the case for most of the year, labor creation is anticipated to continue rising, but the unemployment rate is likely to rise as the labor force increases. This rise in unemployment would support our view that the BoC would remain on hold.
The BoC’s likely “on hold” stance is one reason why the CAD has been so pressured versus the greenback – the USD/CAD neared three-year highs this week. However, the CAD’s weakness hasn’t translated into other markets – for example, the AUD/CAD is near three-year lows.
USD falls for second day
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 2 – 6 October
All times AEST
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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.
