US Non Farms Shifts Sentiment

5 October, 2015

Simon Eastman

Last week finished off with a bang as we saw a massive swing in investor sentiment.

The US non farm payrolls data came out after lunch posting a figure of 142,000 new jobs compared to a forecasted 203,000 new jobs – a significant shortfall which caused dramatic changes to exchange rates. EUR/USD rates moved by 1.5 cents in the single currencies favour in a matter of minutes as traders sold off the dollar in favour of the euro, which also gained over 1.5 cents against sterling.

The reason for this was traders pricing back out the expectations for US interest rate rises, changing the forecast for the first rise to March next year. The likelihood of further downside for the dollar is now quite likely with potential for the euro to benefit as we see the currency see-saw come back into play in a significant way. Sterling managed a small half cent gain against the dollar but is still seen as the riskier of the main currencies so traders inclination is towards the euro rather than the pound.

This week is looking like an interesting one, as Asian markets kick off and digest the US jobs figures and we have a fresh raft of eco stats to deal with. The pick of the key release is highlighted below:

  • Monday – we have a Eurogroup meeting alongside Markit services PMI from Spain, Germany, the EU, UK and the US. Overnight it’s the Australian RBA interest rate decision and policy statement.
  • Tuesday – EcoFin and Eurogroup meeting. Swiss inflation, Canadian PMI and a key speech by ECB president Mario Draghi at 6pm.
  • Wednesday – ECB non monetary policy meeting, Bank of Japan press conference, German industrial production and the NIESR GDP estimate for the UK.
  • Thursday – Swiss unemployment, German import/export and trade balance figures, ECB monetary policy accounts meeting and the Bank of England interest rate decision, policy statement and minutes release. Later in the evening we get the release of the FOMC minutes from the last US Fed meeting.
  • Friday – IMF meeting, Canadian unemployment rate and net change in employment.

Some key releases, especially for those sending money to Canada and of course the looking to buy euros or US dollars as we have key meeting for the EU and the Federal Reserve minutes all likely to cause volatility for the euro/dollar pairings. This will certainly have an impact on the pound, as we saw on Friday, so anyone with an upcoming transfer to make might find it beneficial to speak with one of the CI a team today to discuss the options available to minimise downside risk.