EUR / USD
German industrial production increased 1.6% for September after a 0.5% previously, although this was below consensus forecasts. Although US developments dominated during the day, there were further concerns surrounding Euro-zone coronavirus developments as France registered a fresh record high in cases for Friday.
The dollar continued to lose ground ahead of the New York open as Biden edged towards an Electoral College victory.
US non-farm payrolls increased 638,000 for October after a revised gain of 672,000 the previous month, although this was slightly above consensus forecasts of around 610,000. Manufacturing job gains were held to 38,000 for the month which was below expectations, but construction jobs increased 84,000. There was solid growth in the retail sector, but government jobs fell sharply for the second successive month as census-related jobs declined again.
The unemployment rate declined to a 7-month low of 6.9% from 7.9% and below expectations of 7.6% with the household survey recording a very sharp increase in employment of 2.34mn on the month. The dollar struggled to regain ground, although further losses were limited with the Euro settling around 1.1875.
CFTC data recorded a further decline in long Euro positions to 140,000 contracts in the latest week from 156,000 previously, maintaining the risk of sharp position adjustment if sentiment changes. Counting in the US Presidential election continued over the weekend with networks calling the election for Biden after he secured a winning margin in Pennsylvania. There are still four states undeclared, but Biden has over 270 votes in the Electoral College. The dollar remained on the defensive on Monday and traded at 10-week lows amid strong risk appetite and negative real interest rates. The Euro edged towards the 1.1900 level despite Euro-zone unease.
US yields moved higher following the US employment data, but the dollar as unable to generate any significant momentum and the US currency dipped to fresh 8-month lows near 103.20 against the Japanese currency. Markets will monitor political rhetoric on China from both Biden and President Trump in the short term. The Chinese yuan opened sharply higher in Asian trading on Monday and strengthened to 28-month highs amid hopes for improved US-China trade ties. There was also some evidence that the Chinese central bank was edging towards a slightly less aggressive set of monetary policies.
The Reuters Tankan manufacturing index strengthened to -13 for November from -26 previously while there was a small improvement in the services index to -13 from -16. The Bank of Japan reiterated that there would be no early move to remove monetary stimulus. The yen lost some defensive support as equities continued to move higher and the dollar edged above the 103.50. Markets will also be monitoring the potential for a stimulus package before the Congressional session ends next month. There will also be unease over the risk of verbal intervention from the Japanese Finance Ministry given reservations over yen strength.
The Halifax house price index increased 0.3% for October with the year-on-year increase at 7.5% from 7.3% previously. The firm global risk tone continued to underpin Sterling during Friday. There were further concerns over the UK economic outlook, although the near-term impact was offset by expectations that further fiscal and monetary support would underpin demand. The UK currency strengthened to 8-week highs near 1.3180 against the weaker dollar with Euro support below 0.9000.
EU Commission President Von der Leyen and UK Prime Minister Johnson held a phone conversation on Saturday and both agreed that progress had been made, but that there were still significant differences. EU Chief Negotiator Barnier and his team will be in London this week for further talks and there will be strong pressure to conclude a framework deal this week as time pressures intensify. CFTC data recorded a further small increase in short Sterling contracts to 11,000 contracts in the latest week from 7,000 previously which does not suggests that hedge funds were positioned for Sterling gains. The UK currency held firm on Monday amid solid global risk appetite and traded at 10-week highs around 1.3180 against the dollar with the Euro just above 0.9000.
The Euro was again unable to make significant headway on Friday and settled just below the 1.0700 level at the European close. The dollar remained firmly on the defensive and dipped to 70-month lows just below the 0.9000 level. Swiss unemployment edged lower to 3.3% from 3.4%
The franc was underpinned by further strength in precious metals and longer-term expectations that the extremely expansionary monetary policies by global central banks would support the Swiss currency. This support was offset to some extent by strength in equities with the dollar again just below 0.9000.