Forex Signals Brief December 6: Will ADP Employment Confirm the Decline in JOLTS Jobs?
Yesterday started with the Tokyo CPI inflation from Japan, which showed a decent decline in November after the jump in the previous month, removing the pressure on the Bank of Japan to tweak the monetary policy. That was followed by the Reserve Bank of Australia meeting, which held interest rates at 4.35% as expected after the 25 bps hike last month.
The Eurozone and UK services PMI were released during the European session, showing an improvement in this sector, although risk currencies continued to decline against the USD, which stretched Monday’s upward momentum further yesterday, with EUR/USD and GBP/USD on the retreat.
But, Treasury yields continued to decline, which generally signals a weaker US currency and better equities, although this was not the case yesterday. Fundamentally, the JOLTS report gave the Fed’s inflation-fighters some positive news after the decline to the lowest levels in two years and below 9 million, while the ISM services index showed improvement activity.
Today’s Market Expectations
Today started with the Q3 GDP report from Australia, which was expected to tick down to 0.3% from 0.4% in Q2 while year-on-year growth was expected at 1.7%, down from 2.1% in Q2. Westpac analysts predicted that the Q3 metrics will match the Q2 number, adding that “we estimate that Australia’s economy grew by 0.4% in the September quarter, following results of 0.4% in both March and June.” According to the desk, “the economy is stuck in slow motion, as the intense headwinds of high inflation and higher interest rates impact.” Domestic demand growth is projected to have slowed from a near 3% annualized rate in H1 to a 1.8% annualized rate in Q3.”
The ADP employment numbers will be next and although estimates of 128K new jobs in November, up from 113K previously, the market is skeptical after yesterday’s soft JOLTS job openings. The market is now focused on labor market weakness, so a positive report may cause some upside reaction to the USD, but it is likely to be reversed quickly as traders await the NFP data later in the week.
The Bank of Canada meeting is scheduled for today, which is projected to maintain interest rates at 5.00%. This decision is bolstered by recent Governor Macklem’s statements that “interest rates may now be restrictive enough” and the CPI data, in which all figures fell further, particularly for the underlying inflation metrics, on which the BoC is most interested. Furthermore, despite being positive, last week’s labor market report showed another increase in the unemployment rate.
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