Week Ahead US Employment Data to Guide Market

US jobs to refocus market on fundamentals

The USD was mixed against majors. The U.S. dollar appreciated against the JPY and the CHF but traded lower versus commodity currencies and the EUR and the GBP after a surprise Organization of the Petroleum Exporting Countries (OPEC) supply cut agreement and signs of a settlement between the U.S. Department of Justice and Deutsche Bank.

The OPEC and other major producers have been trying to reach an agreement to curb rising global crude production since the beginning of the year without success. An oil freeze seemed to be the best alternative to achieve an agreement, but the group shocked with a proposed output cut with more details to be hammered at the November meeting in Vienna. Oil jumped more than 7 percent after the agreement, but questions remain on how much impact will removing 700,000 barrels a day have on the price of oil with demand struggling to recover.

The biggest indicator in the market, the U.S. non farm payrolls (NFP) will be released on Friday, October 7 at 8:30 am EDT. The forecast calls for a gain of 171,000 jobs after a subdued 151,000 gain last month. The figures released in June (38,000 jobs) were followed by two massive increases of 287,000 and 255,000. The first presidential debate between Hilary Clinton and Donald Trump had a lot of uncertainty leading up to the encounter, but the market has reduced the impact of political risk as the week went on. Employment being such an important topic in the agenda of both candidates the results of Friday’s job numbers will be part of the ongoing campaign.

The EUR/USD appreciated 0.13 percent in the last five days. The single currency is trading at 1.1238 after the situation with Deutsche Bank crisis decreased as U.S. regulators appear open to a settlement with Germany’s largest lender. The EUR rose on Thursday along with financial stocks as executives from other financial stocks stood by the German bank.

The week of September 26 to 30 was devoid of massive economic indicator releases on both sides of the Atlantic. Of note were the the surprise rise of the German Ifo business climate. The measure of confidence rose to a 2 year high at 109.5 and signalled German businesses are easing concerns following the British vote to leave the European Union.

U.S. consumer confidence also showed a remarkable rise with a 104.1 reading, the highest level since the recession. Consumer confidence has been steadily rising in the U.S. and economists expect consumer spending follows as the disconnect between the two continues to create a consumer paradox.

The second quarter GDP edged up higher to 1.4 percent since the latest estimate. The good news is that this marks a fast pace of growth but it also comes with a loss of momentum and with third quarter data will be back in line to levels seen in the end of the recession. Investment from corporates is still tepid but consumer spending and stronger exports have keep the U.S. economy growing.

Oil indicators gained greater importance as the Organization of the Petroleum Exporting Countries (OPEC) meeting in Algiers brought another surprise. The market was expecting an oil output freeze with high probabilities of no deal given the outcome of the Doha summit and conditions haven’t changed much since then. Saudi Arabia appears to have entered into a compromise and abandoned the market share strategy in favour of an OPEC crude output cap. It is the first time since 2008 since the organization agrees on limiting the amount of crude in the market in an effort to ease the global glut.

The first week of October will be focused on U.S. employment data starting with the ADP private payrolls report on Wednesday and will close with the release of the U.S. non farm payrolls (NFP) on Friday. U.S. jobs have been the strongest pillar of the economic recovery, but as full employment is closer the lack of impressive gains could be detrimental to the U.S. if other parts of the economy don’t pick up their growth pace.

Market events to watch this week:

Monday, October 3
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
8:30pm AUD Building Approvals m/m
9:30pm NZD RBNZ Gov Wheeler Speaks
11:30pm AUD Cash Rate
11:30pm AUD RBA Rate Statement
Tuesday, October 4
4:30am GBP Construction PMI
8:30pm AUD Retail Sales m/m
Wednesday, October 5
4:30am GBP Services PMI
8:15am USD ADP Non-Farm Employment Change
8:30am CAD Trade Balance
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
8:30pm AUD Trade Balance
Thursday, October 6
8:30am USD Unemployment Claims
Friday, October 7
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
8:30am USD Unemployment Rate

*All times EDT