US Dollar May Rise After Jobs Data on Fed Outlook, Market Turmoil

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TALKING POINTS – US DOLLAR, JOBS, FED, TRADE WAR, AUSSIE DOLLAR, YEN

  • US Dollar may rise as August jobs data reinforces Fed rate hike bets
  • Anti-risk USD buying stalled before event risk may return thereafter
  • Yen up, Aussie and NZ Dollars down amid trade war and EM jitters

US employment data takes top billing through the end of the trading week. The economy is expected to have added 191,000 nonfarm jobs last month, marking a pickup from the 157,000 increase in July. The unemployment rate is seen edging down to 3.8 percent, matching an 18-year low. Hourly earnings statistics may prove to be the most potent part of the release however.

Leading PMI surveys have pointed to rising wage costs on the back of labor shortages. Fed rate hike speculation may swell if that translates into pushing the on-year earnings growth rate up from 2.7 percent, a level it has held since June. As it stands, the priced in probability of a fourth rate hike in 2018 stands at 61.4 percent, leaving room for an upshift in conviction to boost the US Dollar.

The Australian and New Zealand Dollars fell alongside stocks while the anti-risk Japanese Yen rose as sentiment soured in Asia Pacific trade. Fears of trade war escalation between the US and China were bolstered as President Trump lobbed fiery rhetoric at Japan, threatening to broaden the conflict. Worries abouta destabilizing credit squeeze inemerging markets as the Fed tightens helped spoil the mood.

Interestingly, the greenback failed to gain traction despite having clearly benefitted from safety-seeking flows in recent risk-off episodes. That may reflect traders’ unwillingness to commit to a directional bias before the jobs report is out. If risk aversion is sustained and the release passes without any particularly disappointing surprises, getting it out of the way might revive haven demand.

See our study on the history of trade wars to learn how it might influence financial markets!

ASIA PACIFIC TRADING SESSION

US Dollar May Rise After Jobs Data on Fed Outlook, Market Turmoil

EUROPEAN TRADING SESSION

US Dollar May Rise After Jobs Data on Fed Outlook, Market Turmoil

** All times listed in GMT. See the full economic calendar here.

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