US jobs numbers should confirm American outperformance

Jeremy Thomson-Cook
Jeremy Thomson-Cook 08 October 2021

  • GBP: New Bank of England Chief Economist speaks
  • EUR: Watching 1.15
  • USD: All points to higher dollar

Sterling 

The pound continues to be supported by expectations of Bank of England rate tightening as early as next month. There is a lot to be said for our belief that the market’s pricing of a slight hike in November and three full rate rises in 2022 is overly optimistic.

Sterling was supported yesterday by comments by the new Chief Economist at the Bank who commented that recent higher price pressures may not be as transitory as some think. While he will likely vote with the consensus in the future, this is another hawkish noise coming from the central bank.

GBPUSD remains under pressure today however and a very strong jobs number this afternoon from the States could see a push towards 1.34.

Euro

Much like sterling, the euro is holding its breath for the US payrolls announcement this afternoon. Investors have been pressuring EURUSD towards the 1.15 level for weeks, today could be the day that it breaks.

USD

A strong jobs number later today should be enough to give the Federal Reserve the green light to begin the withdrawal and reduction of stimulus that is providing the US economy from next month. A good number is widely expected and should be enough to drive the USD higher once again into the close of the week’s trade.


With US politicians kicking the can down the road on the debt ceiling until the beginning of December, the respite gives further opportunity for US yields to run higher also further supporting the US dollar.


Of course, as with all data points a disappointment could be revealed but we are going to have to see a large surprise for the dollar to lose a meaningful amount of strength or backing over the coming weeks.


The US jobs report is due at 13.30.

Elsewhere 

The yen is very much in the crosshairs this morning with rising equity markets and a strong USD both taking the Japanese currency lower. As long as oil prices remain strong as well, we expect the yen to remain weak given Japan’s need to import energy.

Market rates

Today's Interbank Rates at 09:20 against sterling. Movement vs yesterday.

 

Euro €1.177
US dollar $1.359 
Australian dollar $1.864 
South African rand R20.31
Japanese yen ¥152.2