US$ Mixed Ahead of Tomorrow's NFP

USD

The U.S. dollar traded in a mixed direction overnight, gaining modestly against most of its European rivals and Japanese yen but falling against the British pound and commodity-based currencies.  The dollar gained ground against the Euro as Eurozone manufacturing PMI missed estimates.  The greenback also touched its highest level in over a month versus the Japanese yen on relative policy divergence.

This morning’s economic docket is busy.  Nonfarm productivity came in right in line with expectations of a 0.6% decrease, but unit labor costs rose 4.3% in the second quarter.  A separate report showed that jobless claims remain near a four-decade low and serves as further proof that the labor market is improving.  Potential market moving data will be released later this morning which includes Markit Manufacturing, Construction spending and ISM manufacturing.

Attention will then quickly shift to tomorrow’s highly anticipated non-farm payrolls.  Future interest rate expectations will be directly tied to outcome of the release. 

GBP

The British pound was the big winner overnight as yet another economic print registered better than expected.  U.K. manufacturing PMI registered at 53.3 in August, beating expectations of a contraction at 49.0. It also smashed July’s post-Brexit reading of 48.3.  Markit attributed the sterling’s recent drop as “by far the main factor” for the improvements in exports.

The British pound has enjoyed what feels like a strong economic print every day for the past two weeks.  As a result, the sterling is now 3.0% stronger from its multi-decade low reached on August 15th.  The next test for the sterling will be Monday’s Service PMI data.

AUD

The Australian dollar and other commodity-based currencies such as the South African rand gained overnight as strong Chinese factory data sparked a rally in commodity prices.  China’s factory activity rose to a 10-month high in August, surprising to the upside.  As a result, zinc rose over 1.0% to its highest level since May 2015.  Other industrial metals such as lead and tin both gained to multi-month highs.  China is Australia’s largest export market.