Date: 02 Jan 2018

The US dollar may have begun the year on the soft side in Asia but market sentiment this week may hinge on various US economic data releases, starting with Wednesday’s ISM manufacturing index where analysts polled by Bloomberg expect a print of 58.2 in December, unchanged from November. But the main event will undoubtedly be Friday’s releases of US jobs and average hourly earnings data. Traders will recall that the November print for the keynote US non-farm payroll figure was a rise of 228,000 but the Bloomberg consensus for December is for a 188,000 rise with the US unemployment rate forecast to be unchanged at 4.1 per cent. However perhaps the key piece of data markets may be looking out for on Friday is US average hourly earnings where Bloomberg expects a month-on-month rise of 0.3 per cent in December, up from November’s 0.2 per cent but with year-on-year average hourly earnings unchanged at plus 2.5 per cent. Upticks in hourly earnings might support the arguments of those at the Fed who wish to see yet further US rate hikes.

But the problem for those in the currency market who might see the US dollar currently under-valued is that, based on recent months’ price action after decent US economic data, the greenback has struggled to hold gains. If Friday’s US jobs and earnings data are strong but the greenback fails to regain its poise, that could well set the tone not just for that day’s trading but for the first few weeks of January.

Written by Neal Kimberley, External Currency Analyst.