FX markets braced for volatility ahead of US jobs – United States – English

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

Greenback hit after ADP miss

The US dollar was lower overnight after another weaker-than-expected reading from the US labour market caused investors to fret ahead of tonight’s critical non-farm employment report.  

Overnight, the August ADP employment report came in at 99k, down on the 144k forecast, and lower than the downwardly revised reading of 111k in July.

The report follows a weaker report from the JOLTS job opening series on Wednesday night and sparked fears of a miss in tonight’s non-farm employment report.

The US two-year bond yield fell ended at 3.74% — the lowest closing level since December 2022 –- as expectations grew for further Federal Reserve rate cuts. The greenback fell in line with these moves.

The AUD/USD was higher with the pair up 02%. The NZD/USD gained 0.4%.

The USD continued to lose ground in Asia with the USD/JPY down 0.1%, and USD/SGD and USD/CNH both losing 0.3%

US jobs due

Looking ahead to the all-important US jobs report, due at 10.30pm AEST, it is anticipated that the headline nonfarm payrolls growth will slightly increase to 130k in August.

The underlying increase in employment is slowing down, although the July downturn seemed to be inflated by a transient weather effect that should return to normal this month.

The unemployment rate looks likely to level out at 4.2% following a four-month surge. The unemployment rate should climb over time since hiring is decreasing, but it should do so gradually if there aren’t many large layoffs.

A number of factors, including the economic environment, the relative inflation environment, and what has already been priced into Fed forecasts, influence how far lower the DXY may go.

Euro nears highs ahead of GDP

The Q2 2024 GDP growth in the euro area will likely come in at 0.3% quarter over quarter. Notably, we expected a 0.1% quarterly decrease in consumer spending and a 0.6% quarterly loss in fixed investment.

In contrast, government expenditure probably increased by 0.6% on a quarterly basis. Crucially, we believe that net trade—mainly due to peripheral nations—contributed +0.4 percentage points to the headline GDP growth of the euro area.

The euro has remained well supported during the USD’s recent weakening phase, with the euro outperforming in Asia. That said, in EUR/USD, significant resistance is located above at 1.125–1.1297 zone, so the euro’s gains could pause.

USD lower ahead of jobs

Table: seven-day rolling currency trends and trading ranges  

Key global risk events

Calendar: 2 – 6 September

All times AEST

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