As GBP perks up, eyes are on US jobs data

The GBP has picked up on the latest positive Brexit headlines while, after gaining on rising bond yields, the USD now awaits September jobs data.

Previous Day's Market Highlights

Brexit headlines turned more positive once again with reports that the EU welcomed a new Brexit proposal from the UK, and this in turn supported the pound. Sterling recovered 1.30 against the dollar and broke 1.13 against the euro to hit its highest levels since mid-July. Donald Tusk, President of the European Council, supported a Canada-style free trade deal and said it was a “true measure of respect”.
 
Dollar strength this week has largely stemmed from 10-year bond yields rising to the highest level since 2011 after positive US data, including Wednesday’s ADP Employment Change, supported expectations that the Fed will continue to raise interest rates. Higher yields are attractive to investors and strengthen demand for the currency.
 
Australian Retail Sales surprised to the upside overnight but had a limited impact on the Aussie dollar.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1337 1.1337 1.1103 2.06%
GBP/USD 1.3046 1.3298 1.2897 3.02%
EUR/USD 1.1508 1.1815 1.1463 2.98%
GBP/AUD 1.8479 1.8479 1.7926 2.99%
GBP/NZD 2.0185 2.0185 1.9554 3.13%
GBP/CAD 1.6866 1.7190 1.6598 3.44%

Today's Market Highlights

It’s a big day for employment data in North America, ahead of which trading may be relatively contained. The pound has gained this morning following reports overnight that EU negotiators said that a Brexit deal is “very close”. This has allowed the pound to hit fresh highs against the euro since July and against the kiwi since the EU Referendum in June 2016.
 
The US releases its widely watched jobs report for the month of September (13:30 BST), with expectations high after Wednesday’s ADP Employment Change figure surprised to the upside. The Unemployment Rate is projected to fall further to 3.8% from 3.9%, with NonFarm Payrolls still solid at 185K and wage growth a touch softer at 2.8% compared to a year ago, down from the 2.9% pace of growth seen in August. Economists do not expect to see a significant impact from Hurricane Florence.
 
A relatively strong report could strengthen the dollar, particularly if any of the figures come in better than expected. The risk is that markets’ higher expectations are disappointed and the dollar instead weakens. A stronger US dollar could put further pressure on the Aussie and kiwi dollars.  
 
On the Canadian side, a lower Unemployment Rate and higher Net Employment Change could strengthen the loonie. As always, markets will continue to keep an eye out for any further trade or Brexit headlines and react accordingly. Monday is a holiday in the US and Canada.

Today's Economic Calendar

Time Currency Release Consensus Previous
1:30pm USD Unemployment Rate (Sep) 3.8% 3.9%
1:30pm USD NonFarm Payrolls (Sep) 185K 201K
1:30pm USD Average Hourly Earnings MoM (Sep) 0.3% 0.4%
1:30pm USD Average Hourly Earnings YoY (Sep) 2.8% 2.9%
1:30pm USD Trade Balance (Aug) $-53.5B $-50.1B
1:30pm CAD Trade Balance (Aug) $-0.50B $-0.11B
1:30pm CAD Unemployment Rate (Sep) 5.9% 6.0%
1:30pm CAD Net Change in Employment (Sep) 25.0K -51.6K
5:40pm USD Fed's Bostic Speaks

Caxton