Stock markets in Europe and North America have been eerily quiet so far this morning US index futures, the FTSE and the Dax are all down marginally, while Asia Pacific trading was mixed.
The US dollar index has bounced back slightly from Thursday's selloff, with traders waiting for the next shoe to drop. The main factor driving currencies remains speculation on how many times the Fed will raise interest rates this year. Recently the US dollar has been pricing in 4-5 rate hikes this year, up from 2 before the election and 3 in the dot plot. Yesterday SF Fed President Williams indicated he would be comfortable with three. Today and tomorrow, a number of this year's regional voters are speaking, which could influence speculation.
The biggest event between now and the weekend, however, is the US nonfarm payrolls report. The street is expecting an increase of 175K jobs similar to November. The ADP report, however, indicated that payroll growth may have been stronger in November but the party didn’t carry through into December, suggesting that there may not have been as much pent up demand for hiring as there was for getting into the stock market at the end of last year. I think we could see a payroll increase of 160K and a 20K upward revision to the previous month.
For Canada, the street is expecting a small decline again following a 10K increase last month. I think we’ll continue to see small increases in payrolls, and am looking for another 10K increase. Drilling into the data, traders may be looking for signs of whether the recovery in oil prices is carrying through to oil patch hiring.
There are also a number of other significant announcements that could move the markets between now and the weekend, including US and Canada trade balances, US factory orders and Canada PMI. All of these are likely to be viewed through the lens of what this could mean for monetary policy and currency markets. So far sentiment has been hawkish, pricing in a Trump agenda to perfection that needs strong data and aggressively hawkish talk to support. More moderate Fed leanings, data disappointments, or more signs of pushback from other countries on trade could upset the apple cart.