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October Non-Farm Payrolls Will Determine If the US Dollar Has Bottomed
By DailyFX Updates | November 1, 2007
This Friday, we are expecting Non-farm payrolls for the month of October and now more than ever, the degree of payroll growth last month will determine whether the US dollar has hit a bottom. On Wednesday the Federal Reserve cut interest rates by 25bp in a move that some people believe will be their last. GDP growth in the third quarter was very impressive, the strongest in over a year and even though the weakening housing market is continuing to push consumer confidence lower, the recent stability in the labor market suggests that the US economy may avoid a material slowdown. Despite layoff announcements across the financial and real estate sectors, we have not seen a major drop in monthly payrolls. With many banks having already made the bulk of their write offs, the worst of the credit crunch could be behind us. Therefore another month of payroll growth in excess of 100k should give dollar bulls the confidence to return especially given the Fed’s reluctance to lower interest rates further. At this time, the market is looking for a rise of 82k jobs and today’s price action in the dollar indicates that it is already attempting to bottom. Should job growth be anywhere near 125k, we expect a sharp dollar rally. If it remains below 90k however, speculation of a December rate cut will return. The market is still currently pricing in a slightly greater than 50 percent chance of 4.25 percent rates and it will not take much to drive those expectations even higher. Therefore the fate of the dollar hangs by a wire and that wire could very well be the October non-farm payrolls report
noneTopics: DailyFX.com Updates |