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“Following a strong US GDP print, the US data focus in the week ahead shifts to the October jobs report,” ING analysts note and add: “Our economists expect a strong employment rebound after a weather-depressed September reading caused by Hurricane Florence – and they had even hoped for an even stronger outcome than our 200,000 forecast for payrolls, but note that Hurricane Michael hit Florida the week of October payrolls data collection.”

Key quotes

“In terms of wages, we think the annual rate will move up to 3.2%, which would make the fastest rate of pay growth since April 2009, while the unemployment rate could drop to the lowest since December 1969. While markets are broadly expecting this – any strong US inflationary signs could give US Treasury yields another boost and see global risky assets take a hit. The USD would likely remain bid in this scenario.”

“We expect the EUR to stay under pressure as we struggle to see the Italian government backing down on the budget impasse (despite all of Mario Draghi’s best efforts to inject a bit of calm into the situation). Italy’s position seems unmoved with both deputy prime ministers Salvini and Di Maio stressing their reluctance to change the current budget draft. While forward-looking indicators have been more tepid, the only potential support for the EUR could come from stronger GDP and inflation data in the week ahead.”

“At the time of writing, we haven’t seen yet the key decision by S&P on the Italian debt rating outlook – so we can expect some reaction to this when markets open on Monday. Our Rates team say that if S&P mimics Moody’s decision from last week and delivers a rating downgrade spreads could struggle to fall (much) below 300bp – and in fact widen substantially. If, however, S&P just switches the outlook to ‘negative’ – which we definitely don’t rule out – the 10Y BTP-Bund spread could fall back to 250bp, especially if Rome and Brussels try to find some sort of compromise. The latter benign scenario could see a partial relief rally in the EUR – although upside may be limited to around 1.15 as there’s still a long way to go before the Italian budget deadlock is resolved.”