Morning Commentary: U.S. Job Market Remains Hot

Foreign Exchange - Morning Commentary

U.S. Job Market Remains Hot

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
The U.S. dollar reflects the exceptionalism of the U.S. economy relative to its other major counterparts in the world economy combined with the Federal Reserve’s continuous ratcheting up of U.S. interest rates. U.S. growth has ramped up to stronger levels since last year (tax cuts, deregulation etc.) and the U.S. jobs market remains exceptionally strong with an ultra-low unemployment rate and numerous stories continually discussing labor shortages.
Today’s ADP Employment report continues to confirm that the jobs market remains very strong. The ADP Employment report is a private sector survey of the U.S. jobs market that is a precursor to this Friday’s U.S. official employment report and has a fairly strong correlation to the government report. For September, the ADP report showed a gain of 230,000 against expectations of a gain 184,000 with an upward revision to July’s report. Friday’s official government job report is forecasting gains of nearly 180,000.
U.S. interest rates are slightly higher today and the U.S. dollar is stronger against almost all the major and emerging market currencies with the exception of the Latin American currencies. For now, the U.S. economy continues to be an island of strength and will keep the Fed on course for another interest rate hike in December and the U.S. dollar firm in the near term. For now, that paradigm continues to play particularly with a backdrop of concerns about future Chinese growth, Brexit concerns and continued Italian/EU friction.
  • The Australian dollar is one of the weakest currencies today on the back of a much weaker than expected key economic indicator. Building approvals for August were expected to rise by 1.0%, but they fell by 9.4%. Aussie interest rates fell on this news as did the Aussie dollar.
  • The euro rebounded overnight on news stories that the Italian government would cut the budget deficit to 2.0% by 2021 from 2.4% currently. This was short lived as the Deputy PM of the key 5 star party that makes up the government coalition stated that faster growth would check the deficits allowing for increased government spending. The euro fell quickly on these headlines and is sitting near the lows of the session.
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