Accuracy of jobs data to be hurricane-stricken and less than useful

Looking at images of Florida, Puerto Rico, Texas, Louisiana and other states impacted by the 2017 Atlantic hurricane season and it’s easy to see how the destructive weather will have impacted economic activity. As such, rather than usual 200,000ish estimate for nonfarm payrolls that we’ve grown accustomed to, economists are expecting a much more sombre 100,000 reading. Even if the figure comes in at double or half of expectations, it still won’t influence the Fed’s deliberations too much and as such, markets shouldn’t read too much into it either. Despite the nonfarm payrolls headline figure and unemployment rate reacting to the hurricane-induced volatility, wages data won’t be quite as sensitive. As such, it’s these figures the dollar will look to for a guide on inflation, direction and just how much pressure the Fed is under to raise rates. Average hourly earnings are expected to keep pace with the prior month at 2.5% Y/Y.

Plenty for the dollar to chew on

It’s not just Nonfarm Payrolls on the data calendar this week, but both manufacturing and services PMI figures cross on Monday and Wednesday respectively. The manufacturing PMI numbers this morning show a sector that’s still growing and contributing handsomely to economic growth. The dollar’s strength at the beginning of this week will continue should the services numbers follow suit.

The Fed have another particularly busy calendar, with speeches scheduled from Fed chair Yellen (Wednesday) as well as Fed members Kaplan, Williams, Dudley, Harker and Powell. After the somewhat hawkish (and yet unchanged) rate decision from the Fed, a December rate hike is now well and truly priced in. Whether the Fed move again in the early months of 2018 will depend partly on how easily the market absorbs and moves on from such a move – having a fast flurry of Fed speakers talking higher rates is a good way to test this.

Elsewhere this week

While US markets have plenty to mull over, both the pound and euro could have a volatile week as politics overrides any focus on economics. The inconclusive Catalan independence referendum on Sunday could lead to further political fracture if the Catalan parliament deem the results sufficient to declare Catalonia a separate state to mainland Spain. Such a move would place the country into its biggest political quagmire since the Civil War in the 1930s.

In the UK, the Conservative Party Conference is bound to produce more headlines on Brexit and will be a good measure of how close the UK government believe they are to beginning trade talks with the European Union (if you ask Brussels: not very). UK prime minister Theresa May is due to speak on Wednesday.