US NFP: soft landing? 10y T-note on 3.50%.
OVERNIGHT NEWS
# Market short USD and long bonds before US payrolls. US NFP: SG forecast +270k, consensus +200k. SG forecast drop in unemployment rate to 3.6%. USD/JPY erases 135, 10y UST near 3.50%.
# ECB president Lagarde: must convince public that inflation will be brought back to 2% medium-term target in a “timely manner”.
# Weekly performance: JPY excels in G10, CAD sold. Latam currencies shine in EM, buyers emerge in ZAR at 18/USD after 3.6% swoon yesterday on political scandal. Bond yields down in Europe and the UK but up in Hungary and South Africa.
# Day ahead: US NFP, Fed speaker Evans. Euro PPI, ECB speakers Guindos and Nagel.
# South Korea CPI slows more than forecast to 5.0% in November from 5.7% in October, core unchanged at 4.8%.
# Nikkei -1.7%, EUR 10y IRS unchanged at 2.536%, Brent crude -0.1% at $86.8/b, Gold -0.1% at $1,800/oz.
US NFP – focus on earnings after Powell said wage growth is inconsistent with the return of inflation to target
COP –USDCOP lowered after yesterday afternoon’s dollar weakness. The pair continues to trade above 4,770 support level throughout this morning on the back of extending oil gain. Our local trader Santiago Calvache has seen some outflows in cash form RM on a quiet day overall. Local news is light today with October Manufacturing PMI SA at 47.3 (vs, 50.0 prior).
NY Open – It’s time for payrolls
The overnight session was quiet as markets await US NFP data at 08:30 EST. Front-end US yields are slightly lower, but most of the FX complex and equities traded broadly flat. JPY was a notable outperformer – breaking the 200dMA, while GBP and NZD are also holding gains. For US NFP, Citi Economics is calling for a solid 225k increase vs consensus of 200k, and a decline in the unemployment rate to 3.6% while AHE should print softer at 0.3% MoM. Overall, the print should elicit a hawkish market reaction in US yields, though CitiFX Strategy warn that market’s mindset remains risk positive and USD negative. Note Canada also see a jobs report at the same time, after a surprise 100k rise in employment in October, we could see a decline at -15k for November.
Overnight, there were some notable snippets from Chinese officials encouraging growth ahead of the Politburo meeting on December 6, while ECB President Lagarde did not explicitly mention the latest CPI prints, though said inflation will return to the medium-term target in a timely manner. Oil prices trade relatively flat on the day ahead of the OPEC + meeting on Sunday, where markets are still mulling over a production cut or rollover. Elsewhere, ZAR is reversing losses after ANC members came out to support President Ramaphosa, lowering the risk of a resignation. In Latam, Peru’s congress approved the third impeachment attempt against President Castillo – December 7 is his deadline to respond.
