US: NFP may serve to curtail USD selling - MUFG

In view of the Derek Halpenny, European Head of GMR at MUFG, the key event today will of course be the non-farm payroll report for December and the consensus is for a 175k gain although that might be a little lower following the ADP employment increase of just 153k yesterday.

Key Quotes

“Our own internal NFP model gives us an estimate of 220k although our model does have a tendency to overshoot the actual NFP print by about 50k – if that holds it would suggest that the current market consensus is about right – which following the ADP would perhaps be taken positively by the market.”

“In any case, the data of increasing importance in the NFP report is not the NFP print itself but the hourly earnings data. The Fed has as good as accepted that full employment has been reached and hence accelerating wage growth would be confirmation that the Fed’s caution on raising rates is no longer justified. After a weak November m/m reading (-0.1%) hourly wages are likely to have rebounded in December with the annual rate jumping from 2.5% to 2.8%.”

“But our belief is that the market reaction to today’s jobs data might not be large. Donald Trump’s inauguration is just nine days away and hence the appetite of the market for establishing positions or taking fresh views with the potential for greater clarity on government policy imminent will likely leave market participants cautious on trading views on the macro-economic outlook at this point. So we do not expect big moves for the dollar.”