Quiet day yesterday as markets await long-awaited US non-farm payroll figure release

Tom Tong22/Οκτ/2013Currency Updates


Although relatively flat against both the dollar and euro, sterling still put in a pleasing performance. Trading volumes overall seemed quiet with the market waiting for today’s U.S jobs data and Fridays GDP. Overall we saw a slight pull-back against the dollar after last week’s performance saw sterling rocket to its highest level in a month. The pull-back was minor with levels fairly flat and bouncing between resistance levels with traders unwilling to put in substantial positions prior to significant market movement expected on Friday. Sterling was flat against the euro although the euro continues to hover close to the peak hit last week which was its highest level since September.

Make or break will come Friday, the debt ceiling spectacle has driven market chatter and speculation over the past 2 weeks. If it were not for the political pantomime, the focus would have been US NFP and U.K GDP. The fundamentals remain the same in the sense that Q.E is so heavily a marriage of convenience to the release of positive macro data. GDP and employment figures are two of the heavy hitters. U.K GDP is expected to be impressive, which throws up the «will he won’t he» debate about when the BOE will alter rates and alter the recovery measures. GDP is widely called to rise 0.8%; this would boost the pound as it would add to the view that interest rates will rise quicker than first thought. U.S NFP are critical to how the U.S recovery is viewed by global markets. A significant fall or rise will affect global currency baskets. They are expected relatively flat.

Today will see the release of public sector net borrowing figures.


The euro continues to hover near the remarkable peaks it has seen over the past weeks. Although yesterday it retraced against the dollar and sterling, this is just natural downward pressure as it begins to retrace from the spectacular highs. The 8 month highs against the dollar and month long highs against sterling stemmed from market uncertainty over the U.S debt ceiling and a unexpected slip in U.K data. The eurozone continues to display strong signs that it is enjoying a strong recovery, trade surplus and current account figures for the entire group are encouraging and although unemployment is still shockingly high it is beginning to improve. The question now is firstly if the recovery is sustainable and secondly if the recovery is universal. Euro sceptics are forever highlighting the disparity between the stronger and weaker euro members. Quelling these fears will require both the stronger weaker nations continuing to grow across the board. This was clearly demonstrated yesterday, German producer price index rose higher than expected. It rose sharply from -0.1% last month to a seasonally annual adjusted rate of 0.3% As 0.1% was widely called this release was impressive and extinguished any talk of a German slowdown. We also had the release of Portugal’s current account balance which came in at 1.163B compared to 0.561 B this time last year, a further indication of universal sign of progression and welcomed by the market.

There is no data of note out of the eurozone today.


In an overall sleepy day of trading across the board, the dollar did eventually wake up and splutter into life, rising slightly against both sterling and the euro. However, if anything, these gains are only relative as following the debt ceiling debacle, it is bouncing off unusually low levels.

With employment data out today, it is an incredibly important day for the dollar and gives it either the chance to emerge from disgrace or further plunge. The September employment survey was conducted in the week beginning the 9th, long before the government shutdown began, so it will be the last clean report before December’s numbers appear in early January. The October survey will be compromised by the late survey and the unquantifiable indirect private sector job losses triggered by the shutdown, and the November numbers will be compromised by the recovery of these same jobs. It won’t be possible to know exactly what the payroll numbers would have been in either month, absent the shutdown. In our view, unless figures are moderately strong this will likely rule out tapering this year, because the Fed’s core criteria to change policy is clear evidence of a sustained improvement in the labour market outlook. Such evidence will not be available this year. The last clean payroll report this year will likely be fairly sluggish, gains of around 160,000 are widely called. If the gains come in around this level, overall unemployment is likely to dip around 7.2% as opposed to 7.8% this time last year, clearly a impressive improvement. Analysts polled by Bloomberg last week (Ebury Partners included) expect the dollar to strengthen in the long run, but the median forecast for 2015 has fallen 4% since early June. Regardless, today will be eventful.


Written by Tom Tong

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