A turbulent and volatile trading week continues today with the release of US Non-Farm Payrolls for November. The anticipated number is an increase of 180,000 jobs last month after October’s number was 128,000. The expected increase is due to GM strikers returning to work. The unemployment rate is expected to remain unchanged at 3.6%. The USD has been under pressure all weak after weak ISM numbers pointed towards a weaker economic outlook and gave way to speculation of possible Fed rate cuts next year. A positive NFP release may move traders to buy USD while a number below expectations may accelerate the USD selloff.
Once again, the NFP number has surprised the market. US Non-Farm Payroll rose by 266,000 jobs in November, much higher than the expected 187,000 jobs. The unemployment number also moved back down to 3.5% from 3.6%, the lowest the rate has been in 50 years. Manufacturing hiring was up 54,000, the auto industry hiring improved by 41,000 as the GM strike ended, and Healthcare hiring was up by 45,000. This report will bode well for the Fed, which meets next week.
DOW Futures spikes 150 points right after the release allowing the equity markets to see a strong gain today. The USD also strengthened against the EUR and the JPY upon the release.
EUR/USD has moved off overnight highs after German Industrial Production fell by 1.7% in October, which was worse than the modest increase that was projected. Adding to the Euros woes, German Chancellor Angela Merkel’s leadership is under pressure as the new leadership of the SPD party takes over. This is Merkel’s coalition partner and they are expected to demand changes in the government. France has been hit with a general strike and transport disruptions after French President Macron presented a pension reform to the legislature.
GBP/USD is a bit lower this morning as well after reaching multi-month highs yesterday. Election polls continue to give PM Boris Johnson a majority as the election on December 12th moves closer. Negative USD bias aided the GBP rise. The latest release of election polls shows the Conservative party with a 9.6 lead.
USD/JPY continues to move lower despite economic data released in Japan overnight showing household spending dropped 5.1% in October, worse than the -3.0% expectation. The decline was the first time in 11 months and the biggest fall since March 2016. The number is somewhat disturbing since there was an increase of 9.5% in September. Concern over trade talks has kept the JPY better bid as safe haven trades continue.
The Canadian Dollar remained strong overnight as focus today will be not only on US employment numbers but Canadian numbers as well. OPEC has agreed to increase output cuts by nearly 50% in early 2020 but that news did not aid the loonie. It is possible the currency pair is in an overbought situation which would make it more difficult to move higher.
As China and the US continue to negotiate, the Chinese government has decided to waive import tariffs for soybeans and pork shipments form the US. Lifting tariffs is a key point for both sides as negotiations continue.