USD: Assessing the hurricane effect on payrolls – ING

The US releases jobs data for October today. Consensus is centred on a slowdown in nonfarm payrolls to 100k and unemployment unchanged at 4.1%, ING’s call is in line with consensus at 100k, although analysts see unemployment ticking higher to 4.2%. If they are right with this call today, they expect a slightly negative impact on the USD, as some of the strength associated with the previous jobs report is priced out and markets may push the Fed pricing back to 50bp of easing by year-end, ING’s FX analyst Francesco Pesole notes.

Greenback rally loses some steam this week

“That said, we doubt the dollar is due a large correction so close to the US election, and there is also a risk markets (and the Fed) will give a reduced weight to a softer payrolls numbers given the temporary hit to jobs from the latest severe weather events. The unemployment rate should, however, be less affected by those events, and that can have longer-lasting market implications.”

“The greenback rally has lost some steam this week against the euro due to stronger than expected eurozone data, but has remained generally bid against the high-beta currencies that are more exposed to Trump hedges. We cannot exclude that those hedges are increased once the payroll risk event is cleared, and some broad-based deleveraging ahead of a highly-binary US election for markets causes the kind of worsening in FX liquidity conditions that leads to a further rotation into dollars.”

“The US calendar also includes the ISM manufacturing, which is expected to inch higher from 47.2 to 47.6. The employment component is expected to have improved marginally too, and that may attract a bit more interest.”