Daily Market Update

Dollar Falls As Jobs Data Disappoints

December 03, 2021

While volatility remained elevated across asset classes, the U.S. dollar was relatively quiet overnight. 

Overview

Traders have been eagerly awaiting this morning’s Non-Farm payrolls print and the effect it might have on monetary policy.  ADP private jobs data and weekly jobless claims were both strong earlier this week.  Market participants are weighing the Federal Reserve’s hawkish shift and if a strengthening labor market will give the central bank scope to raise rates sooner.  This morning’s print could be taken with a grain of salt regardless because the jobs were created before the threats from the new Omnicron strain of the coronavirus shook markets.The initial reaction to NFP is that of dollar weakness.  U.S. payrolls only gained 210K in the month of November, badly missing estimates of 550K jobs gained.  There was an upward revision of 82K jobs from the previous two months but that does not cover the gap in today’s reading with expectations.  Further digging into the print there are conflicting signals.  Overall job creation was weak and wage growth was softer than expected, but the overall unemployment rate dropped from 4.6% to 4.2%.Equity futures are rising, and the dollar continues to lose as the weak print could slow down the Fed from tightening monetary policy.  Expect jerky moves in currency markets this morning.Later this morning, U.S. Service and composite PMIs will cross the wire at 9:45 a.m., followed by ISM services for November at 10 a.m.  Factory orders and durable goods orders will round out the week at 10 a.m.

 

What to Watch Today…

  • US Service and Composite PMI at 9:45 a.m.

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GBP

The British pounded trended lower against the U.S. dollar after Bank of England policymaker Michael Saunders raised concern about the omicron variant and urged caution in tightening monetary policy too quickly.   “At present, given the new Omicron Covid variant has only been detected quite recently, there could be particular advantages in waiting to see more evidence on its possible effects on public health outcomes and hence on the economy.”  Saunders is a well-known BoE hawk so a dovish statement is noteworthy. Sterling has recouped some of those losses following the poor U.S. jobs report.

 

CAD

The Canadian dollar is in pure rally mode this morning, gaining nearly half a percent against the greenback.  At the same time, the U.S. printed a poor jobs report, the Canadian print impressed.   Canada added 153K jobs in November, beating estimates of 37K.  The unemployment rate fell from 6.6% to 6.0%.

 

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