With a few notable exceptions, the United States Dollar is trading in muted territory this morning with a slight positive tinge
Overview
Geopolitics is once again dominating the news cycle amidst a thin data calendar, up until today, in the lead up to the US’s employment data due out Friday morning. After South Korea’s president declared (and then ended) martial law yesterday, haven currencies, the Dollar included, gained substantial ground in the session but are somewhat reversing course today. France is also due to have a parliamentary vote of no confidence today, moving the spotlight off of Asia and squarely onto Europe. The risk of governmental collapse in France has kept EUR pricing depressed over the last few sessions, and today is no exception. European Central Bank President Christine Lagarde also spoke this morning and highlighted that the risks to the Eurozone economy as a whole are tilted to the downside, saying this sets the stage for further policy easing from the central bank. All eyes will remain on France through the day.
The domestic data calendar finally gained some steam this morning in this very young month, starting the day off with ADP’s employment change for November. The release was a slight undershoot of expectations, showing private payrolls added 146,000 jobs last month. ADP and the government’s employment release, however, have at many times moved in opposite directions, leaving some room for a hot non-farm payroll release Friday morning. There are also several speakers from the Federal Reserve on the docket today, most notably Chair Jerome Powell in a moderated discussion. Powell is likely to continue to flag firmer-than-expected inflation data, but has historically declined to give clear guidance as to what his governors are likely to vote for. The Fed’s next meeting is December 18th and current market odds are split close to evenly as to whether the central bank will cut interest rates or hold steady.
Still to come this morning is the S&P Global composite PMI reading for November, and an ISM Services index also for November. These readings are largely expected to show healthy economic growth, which could give USD some room to run through the afternoon. The big data releases all come on Friday, with US non-farm payrolls and Eurozone Q3 GDP.
What to Watch This Week…
- Non-Farm Payrolls, Friday 8:30AM
- Eurozone GDP, Friday
- Monex USA Online is always open
AUD ⇓
The Australian Dollar is the worst performer in the G10 this morning after GDP data for Q3 came in substantially weaker than expected. Market consensus was for 1.1% growth year-over-year, but the final reading showed that the Australian economy grew just 0.8% in Q3. This has prompted a 1.1% loss for the Antipodean currency, which may be a touch outsized, but nonetheless showcases the fragile ground the Australian economy is standing on. Inflation remains high there, and the Reserve Bank of Australia has in response not yet pivoted to the easing cycle its peers have embarked upon, but slow economic growth throws a wrench into future plans to hold rates steady into the new year.
JPY ⇓
Japanese Yen’s roller coaster ride continues, with the traditional haven currency losing nearly a percent of ground against USD this morning after haven flows exited the pair following yesterday’s martial law declaration in South Korea. JPY is still one of the best performers in Q4, however, as traders have been treating it as an effective hedge against long Dollar positioning elsewhere. The Bank of Japan does appear to be set to raise interest rates by 25 basis points at its meeting later this month, giving the beleaguered currency good upside risk given the Federal Reserve may cut interest rates, substantially lessening the yield differential between the two nations.
