NFP Report King Of The Market

The US dollar remains above the 98 price level near the top of its 2015 trading range. Before the September FOMC decision the US dollar popped to a high just above the $1 level but eased immediately after the decision. After months of calm, the euro has turned down again. With the U.S. Federal Reserve saying a December interest-rate increase is possible and the European Central Bank suggesting it will beef up its stimulus, investors have begun betting that the gulf in policy is bad news for the euro. Today, many investors again expect the Fed to raise interest rates soon and the ECB to push its rates further into negative territory in December as it battles rock-bottom inflation. The ECB is considering fresh policy steps, possibly including a cut to its deposit rate, and is set to make a decision on the matter at its next meeting in early December, the bank said at its October meeting.

Meanwhile, the pound fell 1.2% against the dollar Thursday as Bank of England Gov. Mark Carney’s message also contrasted with Fed comments. He indicated the BOE would hold off for longer than previously signaled before raising interest rates. Sterling fell to $1.5208 in late New York trading, from $1.5387 late Wednesday.

While the euro edged up 0.2% on the day to $1.0884 Thursday, it has slumped 4.4% against the dollar since mid-October. The euro’s late Wednesday level was its weakest since July, and the currency remains far below its summer peak of $1.1714.

On the economic data front, figures released by Destatis showed German factory orders unexpectedly fell in September, by 1.7% month-on-month versus expectations for 1% growth. Meanwhile, figures from Eurostat showed Eurozone retail sales declined unexpectedly in September. Sales in the euro area fell 0.1% month-on-month compared with analysts’ expectations for a 0.2% gain and a flat reading in August. “There are already early signs of weakness,” said Jessica Hinds, European economist at Capital Economics.

“Sales have stagnated in the past couple of months and consumer confidence has deteriorated. This suggests that the recovery in retail sales and overall household spending is already losing momentum.”

The latest Markit Eurozone retail purchasing managers’ index declined from 51.9 in September to 51.3 last month, as sales rose at their slowest pace since June but grew for the sixth consecutive month.

Elsewhere, the Bank of England kept its key interest rate on hold at 0.5%, as widely expected. “We think the BoE is awaiting the next ECB meeting, which is held seven days before the next BoE meeting. The December meeting is crucial for our more hawkish view on the BoE,” said analysts at Danske Bank.

In the Asian market on Friday currencies were flat with low volume ahead of today’s jobs data. The Japanese yen is trading at 121.68, the Aussie is at 0.7145 and the kiwi is holding at 0.6608 against the strong US dollar.  The dollar’s performance on Thursday was largely due to comments from Fed Chairwoman Janet Yellen, Vice Chairman Stanley Fischer and New York Fed President William Dudley–what one analyst called “the three heavyweights” of the Fed’s rate-setting committee–made on Wednesday.

All three stressed that a rate hike at the Fed’s December policy meeting is still on the table. Expectations for a Fed hike this year waned in September and October after Fed officials expressed concerns about slowing growth in China and other emerging-market economies, dragging the dollar down with them.

“There have been comments from Fed officials that appear to be attempting to lower the hurdle on the payroll increase. If payrolls increase about 170,000-180,000 as markets expect, rate hike expectations will heighten further,” Barclays’ Kadota said.  The median forecast for October nonfarm payrolls in a Reuter’s poll of economists is an increase of 180,000, above slightly sluggish job growth of 142,000 in September.