Friday December 2nd, 2022

The US$ weakens, oil prices ease, equity markets & US yields are mixed heading into key US jobs report. Currency, commodity, and equity markets consolidate heading into the key US Nonfarm payrolls report this morning. Economists estimate payrolls to rise 200k in November, cooling slightly from Octobers 261k jobs, 200k jobs would be seen as falling short of the Fed’s turning point in its fight to ease inflation. “Consensus is that recession is coming but equities cannot bottom before it starts, inflation won’t fall quickly so central banks can’t blink, China reopening will be a messy process, and Europe remains tricky,” Barclays Plc strategist Emmanuel Cau wrote in a note. Today, alongside US NFP investors will also be focusing on Average Hourly earnings, Labor Force Participation Rate, Unemployment Rate, in CAD Net Change in Employment & Unemployment rate also Central bank speakers include ECB De Guindos, German Buda Nagel and Fed Evans. In other news. IMF head warns of ‘exceptional’ uncertainty as zero-covid hits China’s economy. President Biden says he is prepared to speak to Putin about ending Ukraine war. Ramaphosa’s presidency in jeopardy as South Africa’s ANC leaders meet. In EU, Hungary still opposed to “job killing’ global minimum tax Orban says. EU countries agree a $60 gas price cap on Russian oil. Biden, Macron vow unity on Ukraine and move to end subsidy tensions. In Currency markets. US$ edges higher heading into the US NFP report with the US$ Index holding near 16-week lows while CNY is set for its biggest weekly gain in 17-years. ZAR is rebounds almost 2% ahead of ANC leaders meet. CNY & Asian currencies firm 0.3% on average vs US$. Trading currencies are mixed with MXN down 0.2%, SEK & NOK weaken 0.3%, while AUD up 0.1%, CHF gains 0.3%, NZD firms 0.4%, JPY strengthens 0.9% and ZAR rallies 1.9% vs US$.

Oil prices are flat ahead of the NFP report, the OPEC+ meeting on Sunday and the EU ban on Russian crude oil starting on Monday. C$ holds steady above 1.34 vs US$ and continues to underperform its G10 peers as investors anticipate the BoC will slow its pace of hiking to just 25bps at its meeting on Dec 7th. Focus will be on CAD jobs data this morning to provide some guidance on BoC direction next week. Support holds at 1.3370 while resistance remains 1.3480.

EURCAD extends gains testing a fresh 9-month high on hawkish ECB comments, while BoC is anticipated to pivot its rate increases. Support rises to 1.4080 while resistance resets to 1.4200.

Euro stalls below 1.0550 ahead of US jobs report. Euro has cautiously advanced this week in the face of US$ weakness and finding support from ECB President Lagarde’s of further rate hikes. Intraday the US Nonfarm Payrolls report will be pivotal to provide direction to the currency markets today. Support rises to 1.0470 while resistance resets to 1.0600.

GBPEUR steadies holding at November highs heading into US NFP report. Support rises to 1.1600 (.8620) while resistance holds at 1.1700 (.8547).

GBP advances retesting 1.2300 vs US$ ahead of the US jobs report. The pound holds near 5-month peak, extending its gains vs US$ to a 4th week. Danish bank economist said “the current account that has been completely priced out, we see that both in real sterling terms and also in real rate terms. All that has fully reversed from late Sept, early Oct”. US jobs report will be the key driver intraday for GBP direction. Support rises to 1.2210, while resistance resets to 1.2350.