Today’s NFP could signal the start of tapering

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As is usually the case with nonfarm payroll day it’s all about the big figure and what effect it’ll have on the financial markets.  The USD has been attracting some buyers over the past couple of weeks, some looking to get into the currency for safe haven reasons, but others because the expectations of tapering have been augmented following the good run of economic data we’ve seen.

Today is likely to be no different as there’s little else in the way of economic data to focus on apart from the nonfarm payroll.  Any figure that comes in better than the 180k that’s expected, which is possible given yesterday’s initial jobless claims hit levels last seen in 2007, could give the dollar bulls even greater impetus to add to the recent USD gains.

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Data/Event Risks

USD: Nonfarm payrolls will be the focus of today where 180,000 new jobs are expected to have been created in August.  Yesterday’s ADP figure was slightly lower than expected but the weekly initial jobless claims surprised to the upside which led the dollar bulls causing a spike in USD taking it to the highest level since the middle of July.

CAD: Around the same time as the US nonfarm payrolls Canada also release unemployment figures so there could be an interesting battle for USDCAD which is yet to break above the 1.0600 level.

GDP: Industrial and manufacturing production is released this morning and so a focus on EURGBP would be worthwhile which has moved much sharper than GBPUSD.  EURGBP is knocking on a 5 month low around 0.8400 which is seen as a major support level.

Latest FX News

JPY: Overnight the Yen has regained a little ground against the dollar causing the USDJPY rate to retreat from testing the 100.00 level.  However, as mentioned if we continue to see rising Treasury yields that Yen strength could be short lived.

EUR: The single currency declined to its lowest level versus the dollar for six weeks as ECB President Mario Draghi said they had discussed an interest rate cut at yesterday’s policy meeting.

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