Pound sentiment remained robust throughout the day, and the break through technical levels day on Wednesday triggered further short covering (reversing bets against the Pound). Analysis of the options markets suggest the potential for further gains if there is a Conservative victory. Three Brexit Party MEPs left the party to become independents and called for voters to back the Tories, maintaining market optimism that the Conservatives will win a majority. Opinion polls continue to suggest a Tory lead, albeit within the margin for error and further surveys could trigger significant volatility. The Pound gained support from the central bank’s more optimistic outlook on the global economy. Sterling pushed to near 1.3170 on the Dollar, 7-month highs and 1.1855 against the Euro, 30-month lows.
The Pound opens a little lower at 1.3150 on the Dollar and there is no tier one economic data scheduled.
US jobless claims declined to 203,000 in the latest week from 213,000 previously, although continuing claims increased. Challenger data recorded a 13.1% increase in layoffs for the first 11 months of 2019 despite a monthly decline. The data overall indicated that the labour market was still firm, but doubts over Friday’s jobs data increased after the ADP data. The trade deficit declined to $47.2bn from $51.1bn previously while factory orders increased 0.3% for October and in line with consensus forecasts.
Data releases had little impact with the dollar edging lower during yesterday afternoon as the Euro against the Dollar edged back above 1.1100. Commodity currencies maintained a firm tone during the day which hampered the US dollar and there was further speculation that the Federal Reserve (Fed) action to alleviate the global dollar shortage was a factor undermining the currency.
The monthly US jobs report will be released today with consensus forecasts for an increase in non-farm payrolls of around 185,000. There will again be an impact from auto workers with the jobs total likely to be boosted by at least 40,000 due to strikers returning to work. Markets will be braced for a relatively weak release following Wednesday’s ADP data and the Euro held just above 1.1100, but the dollar could gain from short-covering if there is a stronger than expected release.
The Euro is managing to keep business in the upper end of the range around the 1.1100 handle so far this Friday morning. After clinching fresh monthly highs near 1.1120 on Wednesday, the common currency appears to have stabilized in the 1.1100 neighbourhood against the Dollar as market participants continue to monitor the alternating developments from the US-China trade front. Also propping up the improved mood in the pair, the Dollar remains under pressure on the back of trade headlines and mixed results from US fundamentals.
Data to watch
13:30 - USD - Average Hourly Earnings
13:30 - USD - Non-farm Employment Change
13:30 - USD - Unemployment rate
15:00 - USD - Prelim UoM Consumer Sentiment
Posted in Daily Market News on Dec 6 2019