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Strong NFP and JOLTS reports support USD ahead of FOMC minutes - BTMU

FXStreet (Łódź) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ, points out that the USD has been strengthening in recent days on the positive US employment releases.

Key Quotes

"The strong non-farm payrolls report last Friday, which was followed on Monday by the weaker LMCI data has been followed by an incredibly strong JOLTS report that has helped offer the dollar some support ahead of the release this evening of the FOMC minutes from the meeting on 16th-17th September. The JOLTS report released yesterday that showed job openings up from a revised 4.605mn in July to 4.835mn in August was way above the 4.70mn consensus and offers strong evidence of a continued tightening of labour market conditions."

"The most impressive statistic from the report yesterday was that job openings as a percentage of total employment (3.4%) surpassed hiring as a percentage of total employment for the first time since the series began in 2001. This points to further strong gains in non-farm payrolls over the coming months and a pick-up in the pace of growth in average hourly earnings, which continued to be subdued in last Friday’s report."

"The strong JOLTS report came ahead of the FOMC minutes from the meeting on 16th-17th September, released this evening. Given we had Chair Yellen’s press conference after this meeting there may be a little less value in today’s minutes. Nonetheless, it will be interesting to see how intense the debate was on changing the wording of the statement that ended up including “considerable time” for keeping rates on hold after QE3 ends and “significant” in describing the degree of under-utilisation of labour market resources."

"A little value in these minutes will also be lost due to what has taken place since the meeting. The S&P 500 hit a record high the day after the meeting and since then has fallen by 3.8%."

"Crude oil prices have fallen by 7.4% since the meeting while the Fed’s 5-year forward breakeven inflation rate has dropped dramatically from close to 2.4% to 2.15%. The DXY index is up a further 2.2% since the meeting took place."

"There has been a clear disinflationary shift in financial market pricing since the meeting and hence any hawkish surprise in the details of the minutes this evening need to be assessed in the context of an FOMC today that is perhaps much more concerned about low inflation than it was in mid-September. Hence, we would be sceptical of any dollar gains this evening on the minutes and would expect any gain to reverse relatively quickly."

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