USD: Looking to Friday’s jobs report and the final week before the US election

The US dollar continued its month-long rally last week before taking a big tumble on Friday, when potentially damaging news about the FBI looking back into the emails of Democratic Presidential Nominee Hillary Clinton fueled uncertainty for the outcome of the presidential election. Before Friday’s news, the dollar was rising on September’s strong pending home sales growth and promising weekly jobless claims results, which continued to hover around 40-plus year lows as the labor market picked up.

The greenback is rebounding this week as personal consumption and spending rates grew faster than analysts expected during September, potentially reflecting a healthier consumer market. On Tuesday morning we’ll see two of the latest US manufacturing output readings as well as a September’s construction spending and vehicle sales results. Wednesday morning will bring ADP’s jobs report for October and mortgage application readings, while the Federal Reserve meeting and interest rate decision is due in the early afternoon. The latest US business activity results, September’s factory orders, and weekly jobless rates will be out Thursday morning. We’ll finish the week on Friday morning with October’s non-farm payrolls report, labor earnings, and trade balance data. Unless there are any negative surprises in the economic data or a change in the expected outcome of the US election (where Clinton is still favored by markets to win next Tuesday), the US dollar could continue on its upward track this week.

EUR: The euro gets another chance to outshine the USD this week

The euro finally rebounded from its month-long slide against the US dollar with more positive economic news out last week. Surveys out of the broader Eurozone showed higher-than-expected consumer and business confidence, which continued to reflect the region’s perceived economic resilience. A slew of producer and consumer inflation readings from France, Germany, and Portugal also showed promising results, helping to lift the currency.

The shared currency is stumbling out of the gate this week, however, as Germany’s retail spending fell more than expected in September and as investors anticipate continued stimulus from the European Central Bank (ECB) to weaken the currency. Tuesday will be light with just Greece’s latest manufacturing sector production report out in the morning, while Wednesday morning will be heavier with a non-monetary policy ECB meeting and the latest manufacturing reports out of Spain, Italy, France, Germany, and the broader Eurozone. We’ll see unemployment rates out of Italy, Spain, and the broader region on Thursday, while Friday will bring a plethora of October business activity readings from all the major Eurozone countries. With potential threats facing the US dollar this week, a decent showing out of the Eurozone could push the euro higher.

GBP: Will the Bank of England hold interest rates steady on Thursday’s meeting?

The pound hovered around its post-Brexit lows last week even as preliminary Q3 GDP data showed the UK economy growing by a stronger-than-expected 2.3% annualized. This is perhaps because many investors and UK consumers are still pessimistic on the country’s outlook as uncertainty still lingers around next year’s official Brexit plans.

Sterling is starting this week choppy on mixed consumer borrowing results. While UK mortgage approvals and net lending levels to individuals picked up more than analysts anticipated during September, consumer credit levels came in about 6% below expectations for the month, possibly signaling weaker consumer demand. Tuesday morning brings the latest UK manufacturing output reading out of the UK, while a same-store sales survey will be out that evening. October’s housing price data and construction sector production results are due Wednesday morning. Thursday morning will cap off the week data-wise for the UK, after presenting October’s services sector activity results, the inflation report hearings, and the all-important Bank of England (BoE) interest rate decision. While analysts expect the BoE to hold interest rates steady at the meeting, a surprise interest rate cut or even hints that BoE members would like to cut rates in the near future could further weaken the pound.

CAD and AUD: Will falling oil prices continue to drag down CAD? Big Monday evening to set the tone for AUD.

The Canadian dollar continued its downward trend against the US dollar last week as oil prices fell below $49 per barrel for the first time since September. The loonie continues to suffer from falling oil prices as this week begins, despite September’s industrial product prices growing twice as fast as analysts expected. Tuesday morning we’ll see the latest manufacturing survey and August’s GDP results, which is projected to show slow but steady growth. Thursday evening will bring a speech from Bank of Canada Governor Poloz, while Friday morning will end the week with September’s trade data, October’s jobs report, and a purchasing manager’s survey.

The Australian dollar finished lower last week as the latest inflation data showed import and producer prices shrinking during the third quarter, an unwelcome addition to the prior week’s poor jobs report. That said, the Aussie dollar is rallying so far this week as investors wait for a big Monday night, with manufacturing sector forecasts, the Reserve Bank of Australia’s interest rate decision, and China’s business activity readings (China is Australia’s largest trading partner) all set to come out. Tuesday morning will bring commodity price forecasts followed by September’s building permit data out in the evening. On Wednesday night we’ll see AiG’s business confidence survey from September and trade balance results for that month as well. The week will end on Thursday evening with September’s retail sales results and a statement from the Reserve Bank of Australia. If the US dollar has a rough time this week, and if economic results from Australia and China are positive, the Aussie dollar could rise as investors trade the greenback for the higher-yielding Australian currency.