If US jobs report were to beat estimates, short GBP/USD?
November jobs report to be released tonight may provide the first clean read of US labor market since August as reports in previous months were largely distorted by the hurricane effect.
- One of the key components in this report is the unemployment rate, which stood at 4.1% in October. If unemployment rate were to rise from this level, the expectations on the Fed to gradually raise the rate will be anchored. On the other hand, if the level were to fall below 4.1%, a steepening yield curve likely is to be seen, and that should drive the dollar higher
- ADP Nonfarm Payrolls increased by 190k in November, down from 235k in previous month
- The consensus among economists surveyed by Bloomberg anticipates an increase in November Nonfarm Payrolls of 195,000
Here is how FX market could react after the NFP
- If the jobs report were to disappoint the market (NFP less than 160k or unemployment rate higher than 4.2%), USD/JPY could mover lower towards 113 given its high correlation to the US Treasuries curve
- If the jobs report beats the estimates (NFP more than 200k or unemployment rate lower than 4.2%), GBP/USD could trend lower towards 1.3350 in the near term due to profit-taking. Just earlier on, GBP/USD has extended gains on news that UK and the EU have reached a breakthrough in Brexit talks
Fullerton Markets Research Team
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