It’s jobs or tariffs

On the first Friday of the month, it will be either the monthly US jobs data or the imposing of the next round of US-China tariffs that will decide the currency market’s near-term direction.

Jobs growth seen accelerating in August

Economists are predicting that the growth in US jobs accelerated in August with the latest survey suggesting 191,000 jobs were added in the month, more than the 157,000 seen in July. Such an outcome would drop the 6-month moving average to 199, dropping below the 200 level for the first time since February.

The unemployment rate is seen dropping marginally to 3.8% from 3.9% even with anticipations of an increase in the labor force participation rate to 63.0% from 62.9%. That would indicate a healthy labor market. Hourly earnings may also get a bit more attention given that Fed member Williams commented overnight that it was “still a bit of a puzzle” why wages growth hasn’t accelerated given the lowest unemployment rate since 2000. Estimates suggest average hourly earnings growth was slightly lower than July at +0.2% m/m from +0.3%.

US data calendar snapshot

Source: MarketPulse

Steady as she goes for currencies – almost

The Asian morning was a slow affair with traders preferring to sit on the sidelines and wait for the headlines. The exception was USD/JPY which had an early wobble in response to chatter that US President Trump may be considering taking on Japan as his next tariff opponent. USD/JPY dropped briefly below the 100-day moving average, at 110.524 today, for only the second time since end-May. The pair has recovered to 110.640 but is now back at 110.53, still facing a second weekly decline.

USD/JPY Daily Chart

Source: Oanda fxTrade

It’s not just US jobs

As well as the full US labor report, Canada also releases its employment change data for August later today. Following on from last month’s stellar add of 54,100 jobs, expectations are for a slowdown to just 5,000 in August. Last month’s just ignited talk of a Bank of Canada rate hike, which didn’t happen this week, and, even if we get the expected lower numbers, the two-month average would still be strong enough to keep talk of an October hike on the front burner.

Other releases today include German industrial production for July (factory orders yesterday were disappointing), the Euro-zone revision to Q2 GDP (though no revision expected from the +0.4% q/q and 2.2% y/y) followed by Canada’s Ivey PMI data for August. A speech from Fed’s Kaplan completes Friday.

However, the data deck is not complete since China is scheduled to release its trade data for August on Saturday with exports seen rising 10.1% y/y, imports up 18.7% y/y and the trade surplus widening to $31.79 billion. We’ll have to pick the bones out of that release when markets open Monday morning.

The full MarketPulse data calendar can be seen at https://www.marketpulse.com/economic-events/

Have a great weekend.

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