The NY session saw an extension of USD weakness against most of the majors on yet another dismal economic data point. The ADP employment report showed a drop of -693K jobs in December and this was -200K worse than the market expectation and a sharp leg-down from the -476K in November. This coupled with the surge in jobless claims and still bleak business surveys suggests the NFP number this Friday will be ugly.
Our official forecast is that nonfarm payrolls will plunge -615K in December after shedding -533K the previous month. This is well below the market consensus of -500K and clearly highlights what we believe to be substantial downside risk here. A decline of this magnitude or more should see the USD lower still as we head into the weekend.
EUR/USD added about 50 pips in the session towards the 1.3640/50 zone. The 1.3750 level provided a good barrier to upside and selling in good size was apparent into 1.3720/40 to boot. The 1.36 mark now looks like the key trigger to downside. GBP/USD was about 40 points higher near 1.5090/95 after a rally towards 1.53 eventually fizzled. Cable looks like it has more room to run if above that level, though below 1.50 it begins to look dicey.
Crude oil collapsed a massive -12% on the day to just above $42/bbl as weekly inventory numbers blew the consensus away. The forecast was for a build of 900K barrels for the week and it actually came in at a huge 6.7 million barrels. This helped USD/CAD push higher despite the weakness in the greenback. Loonie rose about 120 pips into the 1.1940 area in NY trading. The 1.20 mark contained the upside once again and this looks like a huge short-term level. If the situation in Israel stabilizes, expect a relatively swift break through here on the follow.
Upcoming Economic Data Releases (Asia Session) previous forecast
- 1/8 0:30 GMT AU Trade Balance NOV 2952M 2100M
- 1/8 0:30 GMT AU Building Approvals (MoM) NOV
- 1/8 0:30 GMT AU Building Approvals (YoY) NOV
- 1/8 5:30 GMT AU Foreign Reserves DEC 46.7B
