Ahead of NFP – Dollar Finds a Bid

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Market Drivers February 2, 2018
USDJPY inches to 110.0
EZ PPi in line
Nikkei 1.68% Dax 0.31%
Oil $65/bbl
Gold $1345/oz.
Bitcoin $8100

Europe and Asia:
EUR EZ PPI 2.2% vs 2.3%
GBP UK PMI Manufacturing 50.2 vs. 52.6

North America:
USD NFPs 08:30

Ahead of the NFPs the currency market is feeling decidedly better about the buck with USDJPY rallying throughout the night as it inched its way towards the 110.00 figure.

The consensus in the market is that payrolls should print anywhere between 175-200K given the strong indication from ADP report earlier this week. More importantly, the market anticipates that average hourly earnings will rise by 0.3% like the month prior putting wages on pace to a 2.6% year over year gain.

This year, many minimum wage increases will begin to kick in on a state by state basis and that should contribute significantly to the rise in the overall average. If payrolls play out to scripts USDJPY should certainly retake 110.00 level and EURUSD will likely test the 1.2400 support. More importantly, today’s price action if it proves dollar positive could mark an near-term bottom for the buck which has been under relentless assault over the past few months.

However, as our colleague Kathy Lien pointed out, the pre-NFP picture looks rather muddy with ISM Manufacturing employment data signaling a sharp drop and continuing claims rising to 1.953 vs. 1.905 the month prior. If the data misses on both the job and wage gain front, dollar bears will once again regain control, the market will begin to doubt a Fed rate hike in March and USDJPY could slide right back to 108.50

Boris Schlossberg
Managing Director

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