Financial market research and analysis

The US dollar firmed against all of its G10 peers before the labour data due today. The US is expected to have added 173’000 new non-farm jobs in October, versus 156’000 a month before.

There is growing conviction that the Federal Reserve (Fed) will raise the Fed funds rate at the December meeting. The Fed hawks are leading the game before the data.

The last 12-month average (202K) has been solid, despite several months of low performance by the mid-year; the worst being the 38K print on June 2016.

Analysts claim that only a read below 125K/100K zone would challenge the Fed hawks’ willpower to set US yields higher before the New Year.

This being said, solid US data may not prevent the pre-weekend sales in the US dollar. The US dollar’s strength is expected to have limited upside potential and any gains could be reversed before the weekly closing bell, given that a majority of traders will be reluctant to carry US dollar risk over the last weekend before the US presidential election.

Pound gains

The pound extended gains on news that the UK’s high court gave the Parliament the constitutional power to trigger the Brexit. This is good news for the markets, as parliament would soften the tone in the UK’s external politics and would allow a smoother and a more "business friendly" farewell.

On Super Thursday, the Bank of England (BoE) announced that the previous guidance, which would take the bank rate close to zero, has expired. However, Governor Mark Carney refrained from tracing a clear trajectory regarding the future of monetary policy. The BoE’s next move could well be a rate hike, given how much the BoE dislikes the rising inflationary pressures.

The pound extended gains towards the 1.25 handle against the US dollar. The days ahead of the US election are most probably insightful times to gauge the pound’s upside potential against the US dollar. How far could the pound climb, given that both the US and the UK are subject to political stress?