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On Friday, the US employment report will be released at 13:30 GMT. According to analysts from TDS, the data, be good or bad, should reaffirm that the US Dollar is the best game in town at this time. They point out that wages will be key to the market reaction.

Key Quotes:  

“Following two consecutive reports with 300k+ prints for December and January, we look for payrolls to mean-revert to 190k in February.”

“The phase-out of the impact from the government shutdown on the household survey should be reflected on a tick down in the unemployment rate to 3.9% in February, as furloughed federal employees exit their “unemployed on temporary layoff” status.”

“We expect wages to rise by a “soft” 0.3% m/m pace on a favorable reference week, increasing the annual print by a tenth to 3.3% in February. However, a “strong” 0.3% print could see an even larger increase in the annual pace to 3.4%.”

“With central banks relegating themselves to the sidelines (BoC) and even beyond (ECB), a firm payrolls print should reaffirm that the USD remains the best game in town. We see performance remaining well placed against the dollar bloc especially.”

“On the flip side, we think a negative payrolls surprise may deepen the performance wedge as global growth prospects have been sufficiently dimmed. Conversely, USDJPY acts as a good hedge in both scenarios as it is unlikely that Fed hike expectations will be revived in the curve.”