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Dollar may make light on September payrolls

FX:EURUSD   Euro / U.S. Dollar

Catalonia Independence

Independence in Catalonia as a harbinger of the political crisis in Spain. How can the division of the country could affect the euro?

Any political crisis is a bad example for other peoples or nationalities wishing to take advantage of the right to self-determination (in the Spanish Constitution of 1978 there is no such right). In the light of the economic crisis that Europe has been going through for a long time, the problem could really look acute. The split became a factor of uncertainty for the financial markets, putting pressure on the euro and the Spanish stock index IBEX 35 which lost at the time of writing 1.35%. The pair EURUSD is making a second attempt to break through the level of 1.17, as the market accomplishes upward march on the dollar started last week before Friday's jobs data from the US.

NFP

Heightened jobless rate and dampened creation of new jobs in the regions affected by Hurricane promises a fairly modest figure for new jobs - below 100K. Nevertheless, investors are unlikely to view the data worse than the forecast as a sign of a weakening economy, linking the deterioration with the damage from natural disasters.

Inflation and economic growth in the euro area continue to go in parallel ways, confusing the plans of the ECB. The price increase was 1.5% behind the forecast by 0.1%, however, a slip in the key indicator were smoothed by positive changes in various EU economic sentiments.

Shooting In Las Vegas in which at least 20 people were killed, went unnoticed by the dollar and stock markets in the US.

Investors are busy digesting the positive catalysts, whether it's the fate of Trump's tax plan or the possible appointment of Kevin Harsch as Fed's head, known for his hawkish views, which could boost Fed’s hiking process. Yield of US Treasury bonds rose to the maximum since July 2.37 percent, continuing selloff in the fixed yield market allowed the dollar to grab some more bulls’ attention rising against the basket of major currencies.

Good news from China

The US currency was also supported by economic betterments in China, where production activity rose by the highest pace since 2012. The PMI index in the manufacturing sector grew to 52.4 in September, however, the label of the "credit bubble" from China has not yet been removed. The agency S&P downgraded last week the country's sovereign rating by one point, as the growth rate of public debt exceeding GDP will continue to weigh on the country's creditworthiness.

Weak economy is letting down hawkish BoE

Pound sterling quickly repaid the recent surge in buying activity after the Bank of England promised an early interest rate increase. Weak GDP and a worsening of the balance of payments dispelled optimism on Friday and the outlook for the dollar's growth forced investors to abandon the idea of putting more calls on Pound. GBPUSD fell to 1.3270 erasing about 1 percent during Monday session.

Arthur Idiatulin
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This analysis is provided as general market commentary and does not constitute investment advice.
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