U.S. Dollar Thrives in Midst of Contraction in Non-Farm Payrolls

USD

The U.S. dollar made some minor strides overnight but opens this morning’s trading session in familiar ranges. Overall, the greenback has had a strong week as political events abroad have weakened a number of its major counterparts.

Today is jobs day. The U.S. economy shed 33K jobs in the month of September. The number drastically failed to meet already low expectations of an 80K gain. This represents the first decline in payrolls since 2010. The print can only be seen as awful, but it will be taken with the proverbial grain of salt as three major Hurricanes over the past 45 days have led to increased uncertainty over the accuracy of the reading. We will know more on October 20th when a state-by-state breakdown is released. Currency markets are seeing increased volatility after the jobs numbers but the greenback is largely holding its ground against most if its peers.

Over the weekend, we will keep an eye on Tropical Storm Nate that is expected to make landfall along the Gulf Coast late Saturday night. A number of gas refineries have already gone offline and significant damage could send oil prices higher and affect commodity-based currencies.

 

EUR

The Euro is about to close the week down by 1.0% this week as geopolitical downside risks have weighed on the currency along with declines in Retail Sales. The situation is Spain regarding Catalunya’s efforts towards independence affected domestic Spanish stocks and bonds, also dragging down the value of the Euro as leaders ponder if there are other potential scenarios for disintegration in the rest of the continent, particularly in Eastern Europe.

Fundamentally, the Euro-zone economy is not showing any signs of turmoil and current accommodative policies seem to be working. Nevertheless, emotions and national issues are propping up that could put the established order at risk and any uncertainty over the sustainability of the Union, or even a single country, within it will continue to frustrate Euro bulls.

 

GBP

The British pound continued its slide overnight as political headlines continue to weigh on the sterling. Prime Minister Theresa May is facing increased backlash following a strange and ineffective speech earlier this week. Former Conservative Chairman Grant Shapps is said to be urging Tory MPs to ask for May’s resignation.

Overall, the Pound is on track to lose 2.5% against the U.S. dollar this week. Declines in construction, the threat of companies making plans to leave London before March 2019, and the anxiety over delays in Brexit negotiations are certainly erasing the gains Sterling experienced from a determined Bank of England looking to increase interest rates.