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Kathy Lien, Managing Director, Foreign Exchange Strategy for BK Asset Management
Daily Exchange Market Report September 5, 2019
On the basis of today's recovery, investors are banking on a strong one. The greenback ended the day sharply up against the and while recovering its losses against other major currencies. The non-farm payroll is to be released tomorrow and economists are looking for employment growth of just under 160K, up from 164K the previous month. Investors, on the other hand, hope that job growth will be closer to $ 200,000. Their optimism comes after the largest increase in jobs in the private sector in 4 months. remains weak, while job cuts have eased, suggesting an increase in non-farm payroll in August.
Yet there are 5 good reasons why the employment report might disappoint. According to today's report, activity in the services sector rebounded in August, which is good news as services are an important part of the economy. Unfortunately, the report has fallen to its lowest level for more than 2 years, which poses a problem as this sub-component of the non-manufacturing ISM has the strongest correlation with NFPs. In addition, the manufacturing sector recorded the lowest employment index in 3 years, the 4-week moving average jobless rose slightly and confidence declined in all areas. reported fewer layoffs, but companies still lay off workers. With the slowdown in global growth and the risk of US recession, US companies have many reasons to delay their hiring.
put an end to the New York session not far from 107. If the payroll increases by $ 150,000 or less, the pair could fall to 106 as traders prepare for a Fed easing later this month. Alternatively, if the payroll increases by 180,000 or more, the USD / JPY should extend its earnings above 107.50. and they are just as important as non-farm jobs – for a sustainable evolution of the sector, we must witness stronger growth in employment, supported by stable income or lower growth in the economy. employment exacerbated by lower wages. With a planned easing of the ECB next month, it would probably be a good report on US employment that would hurt the most. On the other hand, if the data is weak, it could also be an attractive option in the long run.
Arguments for Stronger Pay
1. Challenger reports 39% increase in layoffs compared to 43.2% the previous month
2. Increase of ADP to 195K against 142K the previous month
3. fall from 1.72 M to 1.66 M
Arguments for Weaker Pay
1. the lowest ISM services since March 2017
2. ISM manufacturing weakest since March 2016
3. The 4-week moving average goes from 212K to 216K
4. The index of the University of Michigan has fallen the most since 2012
5. The index slips slightly to 135.1 from 135.8
Canadian will be published alongside the NFPs, which means that big changes are to be expected. The Bank of Canada left the monetary policy and contrary to expectations, stressed the strength of some branches of the economy. Wages, in particular, have increased, which could indicate the persistent strength of the labor market. USD / CAD fell sharply as a result of this reaction but bounced back on its lows on Thursday. Investors have a hard time believing that the Canadian economy is doing well when growth slows in the world. If the Canadian labor market were to disappoint tomorrow, we could see a sharp rebound in the USD / CAD pair. That said, Canada lost jobs for two consecutive months, so growth is scheduled for August. Many that reinforce the BoC's optimism would lead the Canadian dollar higher, but in this case, the crosses could be more attractive because the USD / CAD will first respond to the NFPs.
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