Currency Market Analysis

Nov 02, 2015 | Currency Market Analysis

Global Themes

A new month of trade found the U.S. currency in shallow negative territory as caution reigned ahead of Friday’s critical snapshot of America’s job market. The dollar’s late October rally to its strongest in more than two months will be challenged by the U.S. employment report on Nov. 6. After slowing in August and September, U.S. job growth is expected to quicken in October. Before boosting interest rates for the first time in nearly a decade, the Federal Reserve wants to see better data from the world’s biggest economy. After this week, the Fed will only get to view one more monthly jobs report from the government before it decides what to do with rates at its last meeting of the year in mid- December. Forecasts call for U.S. hiring to increase by 180,000 in October after September’s subpar gain of 142,000. America’s manufacturing sector will be in the spotlight today with the ISM index due out at 10 a.m. ET.


A critical week for sterling started in upbeat fashion, lifting the pound to a ten-week peak on a trade-weighted basis. In a good sign for fourth quarter growth, Britain’s factory sector grew at the fastest rate in 16 months in October with the PMI rising 4 points to 55.5. More catalysts loom in U.K. services growth on Wednesday and so-called ‘Super Thursday’ when the Bank of England renders a policy decision and issues a quarterly inflation report and the minutes from this month’s meeting.


The euro made its November debut firmer, benefiting from caution ahead of America’s jobs report on Friday and news of a slight upgrade to the bloc’s factory sector in November. Still, meaningful upside should remain a challenge for the euro on the notion the ECB may soon give its so-called policy bazooka greater firepower.


The calm before a potentially volatile Tuesday? The Aussie dollar was mostly steady ahead of the RBA’s monthly policy announcement, due Nov. 3. The Aussie could strengthen should the bank leave its cash rate unchanged at 2.0 percent. However, if the bank should decide to cut rates in the wake of more weak data from China the Aussie would be at greater risk of revisiting recent multiyear lows.


Oil fell below $46 while factory surveys from China showed another month of contraction, news that had the loonie off to a subdued start Monday. Keys to the loonie in the week ahead will be local trade data Wednesday and the nation’s monthly jobs report on Friday. Unemployment is expected to hold at a 7.1 percent, the highest in more than a year.


The dollar lost buoyancy Monday ahead of big ticket data this week on U.S. manufacturing and hiring. Not many reports stand in the way of the Fed’s next and final decision of the year on Dec. 16. Today’s ISM index is forecast to show factory growth stalled with a reading of 50 in October, down from 50.2 in September, the weakest in years. The week’s main event will be Friday’s monthly jobs report. The market wants to see better news on the job market to help justify the case for a Fed rate hike and a stronger dollar.

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