US Nonfarm payrolls to boost the dollar
The dollar is strengthening ahead of the Nonfarm payrolls that will released as usual the first Friday of the month at 2.30pm. Expectations are anyway strong with markets awaiting a release slightly below 200k.
The greenback is driven higher and is now trading at levels around two-week highs against the single currency. In the same time US equities continue to increase. The famous Christmas Rally has already started and the NFPs will bring everything but stop the equity rally. Yet this definitely seems timid compared to what is happening now for Bitcoin.
Amid the NFPs’ release, we will also carefully consider the hourly wages growth which will likely provide any hints of inflationary pressures. Expectations are of an increase to 2.7 y/y from 2.4. This is also why we maintain our view that inflation is coming back up in the US and even though the Fed will raise rates next week, markets are still unsure about what will be the Fed monetary policy for 2018. Three rate hikes a year seem like difficult to achieve as pressures on all asset classes will not be sustainable. This may be one opportunity to buy back the euro against the dollar on the dip this afternoon.
Step forward of EU / UK Negotiations
With the likelihood of a ‘soft’ Brexit on the rise, the British pound jumped: in Friday trading, EUR/GBP fell to 0.8689 and GBP/USD rose to 1.3520.
Markets welcomed the news that the United Kingdom and the European Union have reached a preliminary agreement on the UK’s departure from the EU, including a resolution of the tricky border between Northern Ireland and the Irish Republic. Also settled are the general financial terms and the rights of EU citizens living in the UK and UK subjects living in the EU. Just as all hope seemed lost, a deal was agreed, which makes it hard for us to see anything but a soft Brexit.
