The US$ is generally a little soft against the EU majors after weaker than expected job data, although risk aversion remains the overall theme dominating the price action, with US stocks again sharply lower following the arrest of the CFO of Huawei (DJI -1.7%, S+P -1.2%). Ahead of today’s NFP reading, the ADP report showed only 179k growth in private sector jobs in November, down from 225k and missed expectation of 200k. The Euro and Chf both made sharp gains before reversing off their highs, and even Cable managed a decent rally despite the ongoing Brexit woes. The Yen remains in demand on safe haven ground, while the Aud and the Kiwi have recovered from session lows following the move lower during the session.
In the bond market, the US rate complex stumbled after the ADP outcome. Fed Funds pared-back Fed hike expectations and now have less than 35 bps of hikes priced in into end of 2019. The US 10-year yield fell below 2.83% but then recovered to currently sit at 2.887%. DE-US spreads tightened, putting pressure on the dollar and underpinning the Euro.
Elsewhere, the metals rallied on safe haven demand while WTI fell by 5% before recovering half of its losses after OPEC delayed its decision to cut production. This came about despite a 7-million-barrel weekly drawdown in U.S. crude inventories, with traders more closely focused on the OPEC Meeting, where Russia is not saying anything about the proposed production cut. The silence from Russia has traders thinking that any cut will be less than previously hoped for and caused the sharp selloff.
Looking ahead to Friday, the main focus is going to be on the US jobs data but there is plenty going on before then. First up will be the Australian AIG Performance of Construction Index. This will be followed by a speech in the early Asian time zone from the Fed Chair, Jerome Powell – it could be a busy Asian session if he reiterates his recent dovish outlook. In European trade, traders will look to the EU Q3 GDP and Unemployment data as well as the usual Brexit headlines, but the main event will be the Jobs/NFP/Average Hourly Earnings data (exp 3.7%, NFP +205K, AHE 0.3%mm, 3.1%yy, AWH 34.5).
The China CPI is due on Sunday. Have a good weekend.
Economic data highlights will include:
Fri: Australian AIG Performance of Construction Index, China Foreign Exchange Reserves, Japan Leading Economic Index, Coincident Index, German Industrial Production, EU Q3 GDP, Employment Change, US Jobs/NFP/Average Hourly Earnings data, Rts/Michigan Consumer Sentiment Index, Wholesale Inventories, Consumer Credit
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