Week Ahead: U.S. jobs to refocus market on fundamentals
Employment Data to Guide Market: The USD was mixed against majors. The U.S. dollar appreciated against the JPY and the CHF but traded lower versus commodity currencies and the EUR and the GBP after a surprise Organization of the Petroleum Exporting Countries (OPEC) supply cut agreement and signs of a settlement between the U.S. Department of Justice and Deutsche Bank.
The OPEC and other major producers have been trying to reach an agreement to curb rising global crude production since the beginning of the year without success. An oil freeze seemed to be the best alternative to achieve an agreement, but the group shocked with a proposed output cut with more details to be hammered at the November meeting in Vienna. Oil jumped more than 7% after the agreement, but questions remain on how much impact will removing 700,000 barrels a day have on the price of oil with demand struggling to recover.
The biggest indicator in the market, the U.S. non farm payrolls (NFP) will be released on Friday, Oct. 7 at 8:30 am EDT. The forecast calls for a gain of 171,000 jobs after a subdued 151,000 gain last month. The figures released in June (38,000 jobs) were followed by two massive increases of 287,000 and 255,000. The first presidential debate between Hilary Clinton and Donald Trump had a lot of uncertainty leading up to the encounter, but the market has reduced the impact of political risk as the week went on. Employment being such an important topic in the agenda of both candidates the results of Friday's job numbers will be part of the ongoing campaign.
The Euro/U.S. dollar (EUR/USD) currency pair appreciated 0.13% in the last five days. The single currency is trading at 1.1238 after the situation with Deutsche Bank crisis decreased as U.S. regulators appear open to a settlement with Germany's largest lender. The euro rose on Thursday along with financial stocks as executives from other financial stocks stood by the German bank.
The week of September 26 to 30 was devoid of massive economic indicator releases on both sides of the Atlantic. Of note were the the surprise rise of the German Ifo business climate. The measure of confidence rose to a 2 year high at 109.5 and signalled German businesses are easing concerns following the British vote to leave the European Union.
U.S. consumer confidence also showed a remarkable rise with a 104.1 reading, the highest level since the recession. Consumer confidence has been steadily rising in the U.S. and economists expect consumer spending follows as the disconnect between the two continues to create a consumer paradox.