Good morning,

Whilst yesterday’s update focused on the euro and its internal woes – with sterling recording another step up to 1.1430 against it as of this morning – today, market focus will back onto the USA as it releases its monthly jobs creation report: the non-farm payroll.

Last week, the US posted a record high of 3.28 million new jobless claims, up from the 300,000 area in normal times on the previous report. Whilst a large jump was expected of around one million new benefit claims, the dollar was rocked by the more than tripling of the number, which in turn aided in moving the flow of buyers away from the dollar started by the huge multi-trillion quantitative easing package passed the week before.

To make things worse, the US had to go through the ordeal of another release yesterday, when numbers more than doubled to 6.64 million unemployment claims. The reaction wasn’t as tempestuous as it could have been, with most in the market knowing already that the US is in a sharp recession from this kind of numbers – the key focus is on today’s non-farm payroll number to show how many jobs, if any, have been created in the US economy to offset the damage.

As many regular readers will know, the non-farm payrolls number causes considerable volatility on the dollar when released at 12:30 GMT, every first Friday of the month. Essentially, market makers will react to the jobs number as a reflection on the relative health of the US economy, a high number shows higher growth, a lower number shows slower growth and a negative reading is a key indicator of recession. As noted above, most are acutely aware from the previous releases that the US is in recession, as are most of the world’s advanced economies at this point, so the key question here will be – just how bad is it?

Yesterday,  I mentioned that most currency movements in the midterm would be dictated by how quickly the market thinks each economy can rebound the fastest, post-coronavirus. The non-farm number today will be scrutinised by the market as it always is; but this time, the likely outcomes to be attained will help answer that question not only for the US but also the global economy.

Have a great weekend,

Author: Joshua Haden-Jones, Senior Relationship Manager


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