Global Themes

The U.S. dollar steadied at three-month highs, awaiting marching orders in today’s crucial jobs data for October. The dollar is off to a blistering start to November thanks to better data on services growth, a sector that drives the majority of economic activity, and hawkish hints from the Federal Reserve on interest rates. But the dollar’s rally, which has taken it to one-, two- and three-month highs against sterling, the yen and euro, is only as good as the strength of the job market, a cornerstone of the world’s biggest economy that the Fed monitors closely to decide when to boost interest rates for the first time in nearly a decade. Forecasts predict an increase of 180,000 jobs last month, along with an uptick in wages and steady unemployment at 5.1 percent. For the Fed to move in December, the market would want to see a number of at least 150,000. Anything less would fan fresh worries about growth and weigh anew on the buck.

EUR

The euro steadied above three-month lows against the dollar. We’ll find out today whether the key $1.08 level represents a tentative floor for EUR/USD or quicksand. America’s jobs report will shed critical light. Faster American hiring would underscore the divergent shape of fundamentals and monetary policies with Europe, news that would strengthen both the dollar and the chance of the Fed lifting its key rate in December.

GBP

Sterling fell to five-week lows against the dollar and would be vulnerable to further underperformance should America’s jobs report fuel further gains for the greenback. Pound sentiment was dealt a substantial blow this week in the Bank of England’s downgraded outlook for growth which depicted a U.K. rate hike further out in the wide blue yonder, perhaps no sooner than late 2016. Post-payrolls update: sterling now at late April lows.

CAD

The loonie fell to five-week lows though its fall was somewhat slowed by faster hiring north of the border. Canada netted 44,400 jobs in October, above forecasts of 10,000 which drove unemployment down a tick to 7.0 percent. A deeper look at the data subtracts for the rosy headline number, as the majority of the job gains (35,400) were from the less meaningful and typically lower paying part-time positions.

USD

The best U.S. jobs report all year offered a vote of confidence in the dollar’s latest upturn as it all but cements a Fed rate hike in mid-December. America netted 271,000 jobs in October, nearly 100,000 more than forecast and the most since December 2014. The hiring spree lowered unemployment to 5.0 percent, a 7 1/2 year low. Wages rose a solid 0.4 percent. The dollar soared to late April peaks against the euro and could soon take aim at multiyear peaks hit in March. If there is any downside to the jobs report it’s that it can reignite economy-squeezing strength in the dollar which has been blamed for slowing manufacturing, exports and overall growth.