Global Themes

The U.S. dollar was flat with a bullish bias ahead of key jobs data that’s forecast to be one of the weakest in months. The buck steadied at its highest level in at least a month versus the euro, sterling and Canadian dollar. The U.S. unit climbed to three-month highs against the Aussie dollar, and to its strongest in four versus the kiwi dollar and Swiss franc. Forecasts call for September job growth of around 90,000, roughly half the nearly 180,000 the economy has added on average each month this year. Mother Nature’s hurricanes were expected to put a brake on hiring and therefore not signal a deterioration in U.S. fundamentals. Consequently, a lackluster jobs report might not deal a major blow to the buck while a better than expected outcome would help cement a fourth straight week of gains for the U.S. currency.


While the U.S. economy wasn’t impervious to Hurricane Irma and Harvey, the dollar appears to be to the havoc it wreaked on job growth. The dollar rallied despite news the economy shed 33,000 jobs in September, the first contraction in seven years. The dollar instead took its cues from bullish news showing unemployment at 4.2%, a new 16-year low, and wages up at an annual rate of 2.9%, the most since December. Looking through the noise, the internals of the report suggest the Fed remains on track to raise rates by December.


Sterling cut losses after an overnight slide dropped it below another floor to its lowest in a month. Sterling has waxed but mostly waned this week, taking its cues from remarks from Prime Minister Theresa May who’s fighting to remain in power. After Mrs. May’s speech earlier this week stopped short of uniting a divided cabinet over its Brexit strategy, the pound found some solace today after the prime minister vowed to provide ‘calm leadership.’ Going forward, the pound is likely to be held hostage to developments on the political front, leaving it vulnerable. Fresh off its best month in two years, the pound is on track to shed 2.5% this week, the most in a year.


Bullish factory data from Germany helped to slow the euro’s descent. Still, the single currency hit a fresh seven-week bottom, a reflection of festering political uncertainty in Spain and Germany. Industrial orders from Europe’s biggest economy soared some 3.6% in August compared to forecasts of a 0.7% increase. The data offered evidence of Europe’s juggernaut economy weathering the stronger euro.


Canada’s dollar stabilized above five-week lows after a solid local jobs report kept the door ajar to another interest rate hike. Canada added 10,000 jobs in September, a bit below forecasts of 14,500. But all the hires were the more meaningful full-time positions. Unemployment steadied at 6.2% versus forecasts to increase. While the data may not be strong enough for the Bank of Canada to hike rates from 1.0% on Oct. 25, it could be solid enough to allow for tighter monetary policy in the months ahead.

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