10.10.2016 Daily Market Analysis

The US dollar (USD) ended last week moderately higher against all major currencies after the release of the Nonfarm Payroll numbers. 

The US economy added 156,000 jobs in the month of September, lower than both the expected 171,000 jobs and the previous 167,000 jobs. Average hourly earnings came in at the expected 0.2%, but the Unemployment rate came back to 5.0%, after last month’s posting of 4.9%.  Although it disappointed, the NFP report was largely solid. The latest report puts the 3-month average job gains at 192,000 and the consistent month-on-month wage growth will support consumer spending and encourage the FOMC (Federal Open Market Committee) to strongly consider a rate hike this year. 

Meanwhile, the euro (EUR) and British pound (GBP) both edged slightly higher against the dollar after the NFP data was released. The euro recovered almost all the losses it posted last week, but the GBP still ended the week 4% lower, despite Friday’s pullback. The GBP will continue to be affected by Brexit concerns as policymakers plan tough negotiations into an unknown territory. 

Also, the Australian dollar (AUD) and New Zealand dollar (NZD) remained relatively flat but the Canadian dollar (CAD) lost ground despite a solid Canada jobs report. The Canadian economy added 67,200 jobs last month, much higher than the expected 8,500 jobs and the previous 26,200 jobs. The rate differential story is still operative in Canada, and this may continue to weigh in on the CAD. The AUD/USD traded at 0.7593, up 0.09 percent, while the NZD/USD traded at 0.7142, down 0.33%. 

The dollar sentiment will continue to drive the markets this week but with no major economic data releases expected, as well as Japanese, Canadian and US bank holidays today, investors can expect much lower volatility compared to last week.