USD
This afternoon’s jobs report is the final tier-one data print ahead of the US elections. Due at 12:30 GMT, today’s data is widely expected to show a sharp slowdown in job gains in October, with a print of just 100k projected. That said, there is significant uncertainty around the magnitude of the likely fall in the payrolls reading. While there is broad consensus that last month’s hurricanes should have weighed on job gains, there is significant disagreement to what extent. We are inclined to look for a number below consensus on this occasion, with a handful of leading indicators suggesting downside risks. If realised, this should see the dollar trading softer to end the week. Whether or not it remains that way, however, likely hangs on the outcome of next week’s election, where we think Donald Trump is a very narrow favourite, based on recent polling.
EUR
EURUSD continued to climb on Thursday, helped by a modest upside beat for October’s CPI print. Headline price growth is back at 2.0%, while core inflation stabilised last month at 2.7% YoY. While this, along with better-than-expected growth data earlier in the week should take a 50bp December rate cut off the table for the ECB, we are still inclined to look for a succession of 25bp easing decisions over coming meetings. Today, however, attention for euro traders flips to the other side of the Atlantic, and a US jobs report this afternoon. It is likely to remain there through next week as well given the importance of the election outcome for FX markets.
GBP
The pound struggled through yesterday’s session, sliding 0.5% against the dollar and 0.75% against the euro, as markets continued to digest Wednesday’s budget. The move lower for sterling comes despite the broad outline of the budget looking positive for the pound in our view, with an expansion in fiscal support for the economy set to support growth over the medium term. That said, a sharp selloff in both Gilts and sterling mid-afternoon resurrected memories of Liz Truss’ budget debacle in 2022. For now, it is the underwhelming details of the budget that appear to be front of mind for traders, weighing on sentiment. This dynamic was not helped by the Chancellor yesterday, with Rachel Reeves making an appearance on Bloomberg. The move that smacked of panic, with nothing in the Chancellor’s delivery to dispel that notion either.
CAD
Thursday’s GDP print signalled yet more economic underperformance in Canada. Having been expected to show the economy growing by 1.5% YoY, the data undershot even this low bar by 0.2pp. While it did take a little time for this to filter through to FX markets, this further round of soft domestic data ultimately left USDCAD stronger on the day, with the pair briefly rising to re-test August higher, before ultimately finishing up 0.2%. The focus heading towards the weekend should now be on the US with a jobs report due. Hurricane distortions are likely to muddy any signal, but we nevertheless see risks skewed toward a weaker-than-anticipated print.
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