Friday September 4th, 2020

A volatile Thursday which saw a bout of risk aversion helping to rallying the US$, but crushing US tech-stock. The US$ is set for its biggest weekly gain since June, up 0.7% vs a basket of major currencies in September. Global currency markets for the most part consolidated off yesterday’s lows as they await the US NFP results. US Job growth is expected to slow in August as government financial assistance ended. United Airlines on Wednesday announced it would furlough +16k workers on Oct1st, American Airlines said it would shrink its workforce by 40k. The primary focus of the week has been the release of today’s US NonFarm Payrolls (NFP) with consensus at 1400k – previous 1763k, the Unemployment rate is expected 10.1% – previous 10.9%, net Change in employment consensus 275k vs 418.5k. The US employment data results will drive intraday US$ direction.

Oil prices rebounded but remains on track for its biggest weekly fall since June. US gasoline demand drops and despite the slight rebound this morning in oil prices, analysts expect longer-term weakness in oil prices. A drop in US employment would signal a slower recovery and will add pressure on oil price. C$ alongside oil prices recovered from yesterday’s lows but remains vulnerable to further weakness. Focus next week will be on BoC interest rate decision and their view of Canada’s economy. The rapidly strengthening C$ may be cause for concern for the central bank and could impede Canada’s economic recovery. Today alongside NFP we have the Canadian unemployment data exp 10.1% with net change in Employment exp at 275k. Support building at 1.3030 with initial resistance at 1.3120 (minor) and then 1.3185.

Euro edges lower after disappointing German data and ahead of the key NFP results. German Factory orders expected at 5% came in at a disappointing 2.8%, putting pressure on Euro. It has been volatile week for Euro which has seen a +200-basis points range, and any break from consensus for the NFP could see potentially further volatility for Euro. The weak German Factory data today and Thursdays disappointing retail-sales results are signaling that the EU economy is struggling. Spain & France, both suffering rising coronavirus cases are considering extending their domestic furlough schemes. Intraday US NFP will provide markets direction. Support holds at 1.1780, with resistance sitting at 1.1920.

GBP had its biggest weekly fall in 3 months, the pound is consolidating near the mid-point of yesterday trading range as it awaits the US NFP for direction. GBP has had a volatile start to September trading between 1.3470-1.3250 and is net down ½% for the month. The UK’s economy remains a under pressure with construction PMI data coming in below expectations. Ongoing Brexit deadlock, uncertainty over the UK furlough scheme which ends in Oct and an anticipated hike in UK taxes are negative for GBP. BoE echoed the message of a “difficult time” and warned of a long recovery path. Support remains at 1.3180 with resistance holding at 1.3330.