Global Themes

The dollar stood slightly taller than most rivals ahead of the month’s most important look at the health of the U.S. economy. America’s September jobs report is due today with forecasts calling for a bullish print of at least 200,000 fresh hires. Unemployment is expected to hold a whisker above 5%, a seven-year low. The Fed’s main mission of stoking healthy levels of employment and inflation means today’s jobs report has an outsized say over when U.S. interest rates will rise. An outcome that’s in line or better than expected would have the Fed poised to raise rates this year which could see the dollar test the stronger end of its range. A lackluster reading could send the dollar into a tailspin as it would suggest a later rather than sooner move by the Fed. The Aussie and loonie held above multiyear lows, buoyed by better news from China this week which helped fan a tentative rally for risky assets.

CAD

The loonie jumped to 11-day highs, rebounding further from 11-year lows plumbed days ago, after U.S. job growth came in far below forecasts, dampening expectations for a Fed rate hike this year. USD buyers are finding relief in the loonie’s nearly 3-cent recovery from 2004 lows.

USD

Brace for renewed weakness for the U.S. currency after America’s job market laid a big egg with a paltry gain of 142,000 nonfarm payrolls in September, well south of forecasts of just above 200,000. Unemployment held at 5.1% while wage growth flat lined with a zero reading. Markets now will tip the balance in favor of a Fed rate hike in 2016 from later this year, withholding a positive for the dollar for longer. The bigger worry is that China’s slowdown appears to have washed up on U.S. shores. Job growth in July and August got revised lower by nearly 60,000.

GBP

A tentative revival in risk sentiment worked in sterling’s favor, allowing it to drift above five-month lows. The pound waxed but has mostly waned of late with U.K. interest rates seen on hold for the foreseeable future on account of risks to the British economy from global weakness and low inflation.

EUR

A constructive U.S. jobs report today would run the risk of the euro logging its third down week in a row against the dollar which would represent its worst stretch in eight months. The neighborhood’s weak fundamentals reclaimed the spotlight in news that inflation tipped below zero which widened an already open door for the ECB to strengthen stimulus, a negative for the euro.

AUD

So far, so good for the Aussie dollar which is off to a better start to the fourth quarter after collapsing some 9% last quarter. The Aussie’s tentative underpinning stems from better news on the Chinese economy which helped markets rediscover an appetite for riskier, higher yielding currencies like the Aussie, whose 2% base rate ranks second among developed nations. Underlying sentiment remains negative for the Aussie and it could tumble anew should America’s jobs report sway with the camp betting on a Fed rate hike in 2015.