USD mixed to firmer ahead of jobs – Scotiabank

The US Dollar (USD) remains slightly higher ahead of the US employment data at 8.30ET. Yesterday’s winners (JPY and CHF) in early trading here are today’s losers as sentiment in equity markets improves, says Scotiabank chief FX strategist Shaun Osborne.

USD rises in quiet trade

“Broad market volatility is increasing. That should come as no surprise ahead of the US election: the MOVE bond market volatility index is at its highest level in a year, while the VIX is returning to surpass 20, its highest level since early August. Uncertainty is perhaps helping to stabilize the USD in the short term and could rise a little further this morning as long as the NFP is not a surprise. The consensus forecast for payrolls has. steadily dropped since last week and currently sits at a soft 100k.”

“While weather-related issues and strikes would help explain a low number, a very low number could raise expectations for Fed rate cuts. Bloomberg’s “whisper” number, which points to the increase in contract hiring ADP’s private sector last month has moved in the other direction since midweek and is anticipating a 140k gain in jobs, however markets appear positioned for a decent, though perhaps not solid, gain in jobs. “ISM manufacturing data at 10ET is expected to show little change from September’s soft reading of 47.2.”

“Please note that Dallas Fed President Logan (non-voting) is on the calendar for an event at 9:45ET. The Fed’s silent period is in effect ahead of the FOMC’s decision to next week, so comments will not cover the economic or policy outlook. The DXY has found solid support in the upper 103 zone during the latter part of the week and that should hold into the weekend and early next week. next week as markets await the US vote for the next directional signal for the USD.”